Four Mass. CUs See Opportunity In Biz Lending CUSO

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Recent changes in state legislation paved the way for four Massachusetts credit unions to form Northeast Member Business Services, LLC, a credit union service organization dedicated to small business services.

The $500-million Workers CU, Fitchburg, Mass.; $400-million RTN FCU, Waltham, Mass., $600-million Metropolitan CU, Chelsea, Mass., and $150-million Unified FCU, Peabody, Mass. contributed a combined $1.625 million in initial capital.

"When fully implemented in 2005, businesses will have the same privileges that our individual members have experienced for decades," said Frederick D. Healey, president of Workers CU.

Workers will be the first to go live on May 15 with its business loans, which include commercial mortgages, lines of credit, term loans and SBA loans for member-owned businesses. The credit union will also introduce a new line of business checking accounts with an online cash management tool and services for retailers.

RTN FCU will follow on June 15, with Metropolitan, July 15 and Unified on Aug. 15.

'See A Need'

Healey said the CUSO purchased a "great loan system," and secured separate facilities in the nearby New Hampshire due to tax advantages for the LLC, and hired two top-notch commercial lending experts-Scott Anderson and Rick Slater-to oversee the operation.

"We see a need for it around the country, not just in the Northeast," said Anderson, CEO of Northeast Member Business Services. "I wouldn't say that banks aren't paying attention to the small business owner, they're just not giving them the opportunities they deserve."

Anderson and his COO, Slater, previously worked with Telesis Community Credit Union in Chatsworth, Calif., to form its CUSO, Credit Union Business Partners, which has similar products and services.

Anderson, who has 18 years of banking experience, said he was drawn to the credit union industry because he saw a lot of potential for small business marketing.

"There are small businesses all over the country," he said. "The real issue is how do you reach them? What products are services do they want?"

He said this CUSO is not after the large loans; rather it wants to focus on small business loans of $250,000 or less.

Healey, who serves as the CUSO's chairman, said Workers CU initially developed the CUSO to fulfill a need within the industry and the community it serves. "We have had two or three board members over the last 10 years who own small businesses," Healey explained. "When they came to us and asked about a small business line of credit or a term loan, we had to say, 'No.' And we don't like doing that."

He said changes in Massachusetts's law several years ago that gave state-chartered CUs comparable powers to their federally chartered counterparts gave Workers, in part, new commercial lending authority.

As a community credit union with 60,000 members, Healey said, Workers knew what it had to do. "We became the first CU to apply for expanded loan powers specifically for commercial business loan purposes."

He said while contracting with outside vendors might have been an easier option it was not among the considerations for Workers.

"Part of our long-range strategic planning two years ago was to...provide commercial services and lines of credit for businesses," Healey said. "In recognizing that we did not have the infrastructure, we looked for other options."

Personal Experience

With his own strong background in commercial lending-"I, myself, spent half of my career in commercial lending," Healey said-it felt right to create a CUSO of this kind, he said.

Besides being able to tap into other experts within the industry willing to share the risks and the costs, he said, it allows those at the helm to maintain decision-making power and control of the business lending culture.

It didn't take long for the other three large CUs in Massachusetts to sign on, he said, adding that their CEOs now make up the board of managers. Part of their role right now is to sell the idea to other CUs throughout the Northeast region of the United States, which includes six New England states and New York.

He said the other CEOS on board, thus far, bring to the table their own areas of expertise and a willingness to learn fast. "We're not babes in the woods, so to speak," Healey said

"In our own market, we've seen a lot of commercial banks go from local to statewide, then statewide to regional, then regional to Bank of America," he said. "They are huge, and I can't say that the small businesses are getting the attention from Bank of America that they are going to get from us."

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