Loan Aimed At Getting Businesses To Relocate Does $1.2M During Year 1

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First Credit Union made $1.2 million in member business loans in the first year of its program-and that was without any significant marketing push.

Now celebrating the one-year anniversary of the special MBL program, the CU plans to ramp up its efforts to get the word out about it.

Joe Guyton, vice president of business services for First Credit Union, said the CU designed a proprietary program in 2005 called the First Enterprise Loan Program, or FELP. He described FELP as, "Our effort to offer an incentive to businesses to locate in our community."

"We are statewide in Arizona, and we wanted a way to help the municipal, non-profit and business development community," he said. "In addition to helping the community, we are in it because we've entered into business accounts and business services."

In the initial year of FELP, First Credit Union selected target areas including enterprise zones-portions of communities designated by the Arizona Chamber of Commerce where businesses receive incentives for creating jobs.

"If we select a business, we give them a loan at a reduced rate. It is a significant rate reduction-it varies by maturity and the market, but it is a half-point to a full point lower."

Guyton said FELP has been well received, although the credit union-headquartered here in this Phoenix suburb-has not yet marketed it aggressively. As the program heads into its second year, he said FCU will make professionals in the economic development community aware of it.

FELP's first year saw three loans made for a total of $1.2 million. The loans went to a developer of affordable housing units, a non-profit providing aid to needy individuals and a company that wanted to purchase an old building in a revitalization area of downtown Tucson.

Guyton said it is incorrect to characterize the program as having booked "only" three loans in its initial 12 months.

"Three loans were quite a bit to us as a $470 million credit union. And $1.2 million is a lot for most credit unions in their first year in business lending," he said. "We were quite happy with the first year, because we were new to business loans when we were starting out. Also, we knew it was a unique program."

FCU's board has authorized FELP to book $2 million in loans in its second year, Guyton said. "We approve it locally, so it is easy to manage the program." (c) 2006 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.

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