CREDIT UNION TRAINING
Merging Credit Union Culture with Business Lending Practices is Not Always Easy
At first glance, offering business lending looks straightforward because all credit unions start by acquiring existing business lending expertise, either by:
- hiring experienced commercial bankers, or
- engaging a Service Organization to do the "heavy lifting" of analysis, structure, and so on.
Whether you bring in commercial loan officers or outsource your business lending services, it is, frankly, easy to get it wrong:
- Assuming "more of the same": If the board and leadership do not truly understand how business lending risk is different from consumer credit, they can put the financial health of the credit union at risk. (Visit my "Credit Union Insights" page for short articles you can use to help your board see things differently.)
- Missed signals: Credit union staff are not used to dealing with questions and issues unique to business lending. Will a teller recognize a possible business customer, or respond to a query appropriately? Everyone in the organization must develop awareness and understanding to serve members well..
- The business lending island: when the only people who really understand business lending are your commercial loan officers or your CUSO, that can dilute the culture that has made you successful. Will you end up with different approaches to service for business vs. non-business members?
In the end, culture is what makes a credit union work. A credit union has a fundamentally different approach than a commercial bank.
When business lending practices are not the responsibility of the entire credit union – from top to bottom, just as your traditional services have always been – risk increases, service fragments, and success falters. Not everyone needs to know how to handle a business loan, but everyone does need to understand key concepts about member business lending. (For more about the cultural impact of adding MBL to your services, download my 'think piece' on "Making Business Lending Work For Your Credit Union".)
Very simply, business lending is too important to be left solely in the hands of the business lenders. It requires engagement throughout every level of the credit union.
Training can build awareness and technical knowledge at:
- The Strategic/Policy Level. Do the Board of Directors and Senior Management truly understand how business credit risk differs from consumer risk, and how business lending policy and standards must be structured to guide lending practices?
- The Management/Supervisory Level. Who provides oversight to staff involved in business loans? These supervisors/approvers do not need the same set of analysis, structuring, etc. skills as loan officers. Rather, they need to know what to look for to ensure soundness and to follow policy.and standards must be structured to guide lending practices.
- The Transaction/Loan Level. The staff who actually work with members' businesses to make loans need technical knowledge and skills. They also need a solid foundation of sound lending principles to manage credit risk.
- The Support/General Level. Everyone in the credit union interacts with business members at some point. Do administrative staff know what is different about processing business loans? Are general CU staff alert to signs of business lending opportunities among existing members?
Business lending is a great service, and a great opportunity. But it is not a simple extension of traditional credit union lending.
Are you confident that all your staff know how to make the most of business lending services for your credit union? It takes an entire credit union to make MBL work!
For Training to Make the Most of MBL at Your Credit Union, Please Contact Me