AUSTIN, Tex.-Credit unions looking to boost lending portfolios should consider adding "merchant lending" to their loan mix.
Teres Solutions CEO Tim Kelly believes credit unions should discuss that loan alternative during 2010 planning sessions as the opportunity is "big. We think there is a tremendous opportunity for what we call merchant lending - where a local financial connects with a local business to provide indirect lending to their customers."
Whether merchants sell pools, audio systems, or lawn tractors, Kelly suggested they will be wiling to listen to CUs because a number of national lenders are withdrawing from merchant financing. "Outfits like Capital One and GE Capital have pulled back nationally and have opened the door for the local lender," Kelly said.
If CUs make the move, he said they can see a sizeable payback. "It can be higher than auto indirect lending. We are seeing yields between 8% to 12%." Kelly said a Teres client started with one local swimming pool company and has expanded the relationship across its state. "It also opens a myriad of finance opportunities," Kelly said. "It opens the door for commercial deposits and lending."
Predicting lending will pick up in 2010 with the economic recovery, Kelly said CUs should evaluate their loan portfolios and loan processes. With the economy changing financial behaviors of many members, he recommended examining loan portfolio trends to "tweak" approval rules. "It's also a good time, with lending slow, to evaluate your loan processes to make sure they are efficient and ready to handle the increased demand that's eventually coming."
For info: www.teressolutions.com
