Working With CUSO Helps CU To Double Business, Spread The Risk

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BATTLE CREEK, Mich.-Omni Community Credit Union has doubled its business lending portfolio over the last year and attributes a great deal of the success to working with a CUSO.

Omni Community has grown its portfolio from $5 million to $10 million. CEO Ted Parsons contends that for small-to-medium-size credit unions, conducting business lending through a CUSO not only increases opportunities but also gives the credit union confidence to expand the commercial lending portfolio.

Omni Community is working with the Troy, Mich.-based Commercial Alliance, a business lending CUSO owned by Omni and five other Michigan credit unions.

"The CUSO relationship allows us to spread our risk through participations," stated Parsons. "The average size of our commercial loan here is $200,000."

Working through the CUSO also has allowed Omni to play bigger in its local market, said Parsons. For example, it just closed a loan for $2.4 million to a local restaurant. "We took a piece of that and participated out the rest. Being a $250-million credit union we don't want to have too much money loaned out to one individual. Even though we are well capitalized, I am a CEO who likes to sleep at night."

The CUSO arrangement spreads risk geographically, too, Parsons said, by participating in loans from CUs across the state. "Our business loans are not concentrated in Battle Creek."

The approach is working, not only evidenced through strong loan growth, but by the CU's zero delinquency rate within its business loan portfolio, which totals 55 loans. Parsons noted that leveraging SBA loans and government guarantees reduce the credit union's risk, as well.

Developing Expertise

Before Omni expanded its business loan program it hired a commercial lending expert with eight years of experience, and a credit manager with 10 years of commercial underwriting experience.

Strong community relations, while not as easy to attribute to the lending success as other factors, has played a role in business loan growth, conceded Parsons.

"We have had a concentrated effort to raise our level of visibility. Several of my executives sit on local boards, like Junior Achievement, the chamber of commerce, the Rotary ..."

Banks tightening business lending standards has not hurt Omni's efforts. With so many banks saying no to small businesses and Omni behind the $2.4-million loan to the local restaurant that has added almost 75 jobs to the community, Parsons said Omni is making a name for itself among local businesses. "Businesses just know more about us now, and word of mouth has had a great deal to do with the increase," Parsons said. "We have a great value proposition and we are out there promoting it."

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