Does your credit union shy away from offering commercial lending and business memberships? You wouldn’t be alone, but you might be missing out on opportunities to better serve your community.
Contrary to what might be popular belief, COVID wasn’t a death knell for small businesses. Yes, many struggled to weather the storm, but others found opportunities to adapt and grow, or to kick off a new business. According to data from the U.S. Census Bureau, more than four million business applications were filed in 2020, up 24 percent from the year prior, and 51 percent greater than the 2010-2019 average.
But this isn’t merely a byproduct of the pandemic. Small business applications continue increase, including a record 5.5 million applications in 2023. So with small businesses on the rise, where have credit unions fit in?
According to The Financial Brand, commercial loans outstanding at credit unions increased by 24.5% in 2022, double the growth rate reported by banks, greater even than credit unions’ overall loan growth that year. That said, credit unions’ total market share in commercial real estate, while slowly increasing, was still only 3.1% as of year end 2023.
Although big banks dominate commercial banking, credit unions are gaining speed, especially as technology bridges the gap, providing their member businesses with the tools they need to succeed.
Get good by starting small
Sure it would be fun to catch a 2,000-pound Atlantic bluefin tuna (don’t ask me how), but getting the gear to get him in your boat is challenging and expensive. Similarly, rather than aiming your sites at big businesses in your area, consider first that there are roughly 60 million freelancers, gig workers, and sole proprietors in the U.S., and they need help too.
Some will try to make do with a retail banking solution, and it may work for them! But others may need something a little more sophisticated that gives access to a few more tools and features to make managing their small business easier. Their businesses are not so complex that they need the Cadillac of commercial banking solutions either. Instead, look for a happy middle ground that gives them access to accepting payments, quick access between their personal account and business membership, and of course, options for credit.
Just like your members may have different needs that you cater to—simple vs. tiered checking accounts, free vs. for a fee credit cards, etc.—so too will your small business accounts have their quirks. When starting off your business offerings, make sure you have given some thought to the different kinds of businesses that you are looking to add, and what kinds of products and services they will need; that way you will have a robust portfolio to offer them when they come looking for help (or as I will address in a future article, you go looking to help).
Last for now is to approach small businesses with the heart of a servant. Managing a small business is hard work. The last thing they need is a hard time from their financial institution. Make sure you will have the capacity to speak with them regularly, especially early on in the relationship, and work with them to help them thrive. Your efforts will be repaid not just in hopefully seeing a successful business grow and their need for commercial loans with it, but also in the word of mouth within the community that gets your credit union more business.
