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Credit unions weren't cut-out to capitalize on small business lending.
Core systems at most credit unions are consumer systems, and "won't accommodate the kinds of loans that small businesses need," said Bob Ellis, director of Business Services at GTE Federal CU.
Furthermore, credit unions focus on developing long-term relationships with small business members. In the short run, that's not the way to build a business lending program, he said.
"Small business lending is all about relationships," Ellis explained. "Small business members are not financial superstars. They need advice and they rely on their credit unions to steer them in the right direction. We can identify opportunities that small business members don't know exist."
Despite the fact that credit unions aren't naturally positioned to serve the business lending market, GTE FCU brought in technology in January that not only enables automated small business origination, document preparation and servicing, but also maximizes loan relationship management, said Ellis.
The lending department's staff of five expects to have a small business loan portfolio of nearly $12 million by year end 2004, said Ellis. "We're doing fine."
32 Years In Small Biz Lending
Ellis has been in small business lending for 32 years, the past two years of which have been at GTE FCU. The $1.9-billion credit union uses OnePoint, a suite offering relationship management, integrated with LiquidCredit Bank2Business for the web-based loan application process, both provided by Baker Hill Corp. of Carmel, Ind.
"Bank2Business allows us to make decisions on smaller loans or business credit cards with a whole lot less due-diligence," Ellis said.
GTE FCU will eventually run all prospective loans under $50,000 through the Bank2Business decision matrix, resulting in little manual underwriting, he continued.
"The decision matrix takes some time to refine," said Ellis. For the next few months, GTE FCU will continue checking every loan and redefining variables until the matrix is "tighter and tighter and the gray area is as small as possible."
Meanwhile, the OnePoint relationship platform "helps service the member terrifically" he said. GTE FCU's Business Services employees, senior management and loan committee members manage all commercial lending accounts and have access to OnePoint at different levels of security, he added.
"All of our business members and prospects are entered in OnePoint. When it comes down to discussing a loan offering or negotiating new arrangements with a member, all of the member's information is there in one place," Ellis explained.
OnePoint consists of modules that handle specific lending tasks, including sales management, financial statement analysis, and collateral and exception management.
At GTE FCU, all of OnePoint's modules are well integrated with one another and with the CU's other systems, including the Bankers Systems Inc. Rembrandt Lending System for loan documentation and its current loan accounting system, said Ellis.
"OnePoint's tracking mechanism allows us to track financial statements, filings and reportings, and continually generate reports so that we can chase down what we still need and make sure that a loan is perfected," Ellis said.
OnePoint's integration with the Bank2Business origination software makes the loan application process easier, he said. "Essentially we press a button and the OnePoint information goes into Bank2 business. "Credit reports are automatically pulled and the information is amalgamated so that you can decide whether or not to make the loan.
"If we turn down a loan, we can click an icon for a declination letter," he continued. "If we approve the loan, then the Bank2Business data gets dumped into Rembrandt for closing documents. We can also go so far as booking the loan in our accounting system. The loan is then dumped back into OnePoint so that we can maintain a member profile. The system goes full circle."
In the near future, the 220,000-member CU will replace its current core processing system with a system that has an integrated loan accounting module, which will grant additional ease to the small business lending process, Ellis said.
For more info on this story:
* GTE FCU at www.gtefcu.org
* Baker Hill at www.bakerhill.com