Member business services-not just member business loans-continue to offer a huge opportunity for credit unions-and the key to success is emphasizing the personal touch businesses can expect from a credit union, according to several member business service experts at CUNA Mutual Group's Discovery Conference.
"There are three ways you win when you offer member business services," said Kevin Lytle, VP-strategic business development with CUNA's Center for Research & Advice. "Small businesses use a wider range of products and services than individual consumers, it gives you the opportunity to attract the employees of the business as well as the personal needs of the entrepreneur."
In addition to MBLs-typically the focus of any credit union discussion of member business service-small businesses need cash management, deposit and credit services. It is some of these services that are most likely to make the credit unions a small business' primary financial institution, and it is the PFI that is most likely to score the loan if and when the small business needs one, Lytle explained.
And the key to wooing-and keeping-a small business is the personal relationship.
"More than any other factor, relationships determine which provider small businesses choose for their credit needs," Lytle observed. "For example, 40% of small business companies reported their relationship with their loan officer being the most important factor in deciding whom to seek credit from. Only 28% reported that better rates were their No. 1 factor."
That personal relationship, or lack thereof, is also the primary reason a small business changes financial institutions.
"Contrary to what one might assume, currently small businesses are generally successful in obtaining the credit they need from lenders," Lytle offered. "What bothers them is lack of quality service, particularly due to a high turnover rate, after a loan has been made. They need someone who understands their particular business' needs, and they don't have the time to re-educate a new loan officer, so that's why turnover is such a problem for them. And at larger institutions, small business lending is often a proving ground, so the turnover in these positions at big banks is high."
A credit union's local lending authority is also a premium to small business owners. With so many mergers in the banking industry, small business owners get fed up when they feel like they have lost access to the person who really makes loan decisions. "Stress your local authority," Lytle advised. "The branch is most important to developing this relationship."