LAS VEGAS -
Brent Lawrence, senior vice president of marketing and chief marketing officer for Salt Lake City-based MACU, said offering business loans and business services leads to more services per household, higher loan balances and more deposits. With no business relationship, the average household has 2.89 services with its CU. With a commercial or business relationship, that number jumps to 4.1. Member households with an SBA loan have an average of 4.93 services.
"The same trend is observed in average retail loan balances, deposit relationship balances and total loan relationship balances," he said. "Business loans impact a credit union's growth, loyalty and overall performance. Credit unions own only 4.4% of the total SBA market, so there's a lot of market out there."
There are many opportunities in the business lending and services space, Lawrence told attendees of the recent CUNA Marketing and Business Development Council conference here. He said many entrepreneurs look to credit unions because they don't need millions of dollars for their businesses; they need $30,000 or $50,000.
"Banks don't want to service those people," he declared. "And not all SBA loans are for startups. Some companies need to make improvements, expand or purchase new vehicles."
SBA research has found 22% of veterans are purchasing, starting or seriously considering opening a business. Lawrence said CUs should mine their member rolls for veterans and build a "special relationship" with them.
More opportunities: Lawrence said 29% of CU loan growth in 2005 was in business loans. Yet, only 20% of American credit unions actively are offering SBA loans.
"Why are we leaving this on the table? Out of fear or lack of knowledge," he said. "Business lending is a complex topic, and it can be expensive, but 68% of credit union members who have business loans have them with their credit unions. Why? Because they know, trust and want to work with their credit unions. And we want to work with them. We have a tradition of being there for our members. We are in the business of people helping people, no question."
According to government statistics, 98% of U.S. businesses are small businesses, and they employ half of the workforce. When a CU makes a small business loan, Lawrence said, "We are creating jobs by putting capital in our marketplace; with our neighbors."
For CUs ready to take the next step, Lawrence cautioned SBA loans are not like other consumer loans. He said an investment must be made in building infrastructure and preparing the products, as well as the delivery and marketing channels.
The first stage, he continued, is to talk with members who own businesses and discuss what their needs are. Then, begin marketing within the CU by getting the branch managers involved. "He or she is the bridge to the frontline staff and is a referral source."
Next, go to the employees, Lawrence continued. Tell them the CU will be issuing SBA loans, help them understand the product, and, more importantly, help them understand the SBA relationship strengthens the overall member-credit union relationship.
"Make referrals easy and train the staff to cross-sell," he counseled. "The staff must be trained, because they won't talk about what they don't know."
Once the staff is prepared, go to the members next, Lawrence advised. Newsletters and statement stuffers are "believed" more than other sources, but CUs also should promote the new loan products in their branches with stand-ups, window displays, posters and ATM ads.
"We spent a lot of money because we wanted to make a big splash in the marketplace, but not every credit union has to," he said. "There are many ways to get referrals, and a lot of business comes from referrals. Get to know CPAs and attorneys in the neighborhood. Go speak at Kiwanis Clubs, Chambers of Commerce and exchange clubs for entrepreneurs. Host seminars at branches.
"It does not take very many SBA loans to impact the bottom line," he added.
