For the first time ever, I attended the Credit Union National Association (CUNA) Business Lending Roundtable in Phoenix – and I have to say, it is one of the best events I have attended in quite some time. The audience was the largest ever for this CUNA event, and the roundtable was highly interactive in terms of networking, exchange of information, and participation.

One of the main topics of discussion was credit unions’ desire to grow their business lending outreach. Prior to my red-eye flight back to Raleigh after the event, I had the opportunity to attend a Phoenix Suns game against the Atlanta Hawks with some customers and colleagues (which was a blast!). And just like every player on the court needs to know their teammates’ and opponents’ tendencies, strengths, and weaknesses in order to be successful, it is important for credit unions looking to grow their business lending to understand the tendencies, strengths, and weaknesses of the businesses they’re selling to.

What can credit unions do to maximize their growth in the business lending space? And what tools and resources can they use to build a successful long-term growth strategy?  Some of the points below reflect key topics discussed by the many participants during the roundtable.

More C&I, please

Commercial real estate (CRE) loans have long been the cornerstone of credit union loan books. Logically, credit unions’ business lending portfolios are predominantly weighted with CRE loans. These types of loans are easy to understand, and they are popular with credit unions.  Naturally, the desire to expand and diversify business lending continues to grow for Credit Unions.

Commercial and industrial (C&I) loans are a lending area in which credit unions need to grow in order to diversify their loan books. The benefits of C&I lending are the long-term business relationships that can be forged through lending as well as the broader outreach to the overall industrial landscape that will help grow credit unions’ books of business. The challenge for credit unions in this space is the demand to add more banking products to serve C&I companies, which means a call for them to include products such as treasury management services, positive pay, cash management, or automated clearing house (ACH) transactions.

A participant at the conference aptly described the difference between CRE vs. C&I lending: CRE is a “one-night stand” while C&I is a “marriage.” The commitment associated with C&I lending is more uncertain, but the long-term benefits are there.

Deposits, deposits, deposits

As many bankers are already aware, deposits are a hot-button topic in the world of banking – and they are top-of-mind for credit unions as well. But how can credit unions drive up deposits and use business lending to do it?

This is another area in which C&I lending can spell a major benefit because it can help drive deposits. Although simply giving out more C&I loans sounds simple enough, many credit unions and their boards are still hesitant to give out loans to certain industries due to the fear over a lack of knowledge regarding those industries. However, when credit union’s business bankers are equipped with tools such as Vertical IQ’s Sort and Target capabilities, this makes it easier to identify cash-intensive industries and the trends and risks associated with them. In turn, credit union boards are able to see which industries are worth loaning to because of their deposit potential and have a better understanding of the risk and the trends associated with those industries.

The challenge of finding commercial bankers

The discussions at the roundtable about talent were especially lively. While the demand for commercial bankers is on the rise at credit unions, experienced commercial bankers are getting harder and harder to find.

Credit unions want to expand more into the C&I lending space, and this will require not only a breadth of new services, but also the right team to be able to provide and sell those new services. Since it is getting more difficult to find commercial bankers with a large degree of industry expertise and experience on their resumes, it is more prevalent than ever for credit unions to ensure that they have the right resources – and the proper training mechanisms and processes – in place to provide that industry expertise and equip less-experienced bankers with the confidence to lend.

“New” industry knowledge is key

In order to better serve business members and expand into the C&I lending space, it is important for credit unions to be equipped with the latest, most relevant industry knowledge.

For example, when credit unions perform “periodic reviews”, which occur annually or more often depending on the loan size, it is important to have updated industry information. Credit Unions will need to show examiners and their board that they understand their borrowers, the borrowers’ industries, and the loans they are giving out to those industries. And in order to have the latest and most valuable industry information, they need to have the tools and data to provide that updated information for their periodic reviews.

Industry Intelligence provides that “missing piece” for credit unions to enhance their success in C&I business lending across sales, underwriting, and even marketing. Industry Profile chapters such as Current Conditions, Industry Forecast, Business Valuation, and Quarterly Insights arm commercial bankers with timely, focused, and relevant industry information they can use to better understand clients and their industries and forge lasting relationships with them.

>> For more information on how Vertical IQ’s Industry Intelligence can help credit unions build relationships in the C&I lending space, click here

Image credit: Alex Rousseau, Vertical IQ, and Matthias Zomer via Pexels

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