Lenders Of Choice

In may best be described as a classic case of supply meeting demand. Several area credit unions are increasingly targeting business owners looking for an alternative to banks as their lender of choice.

Case in point: Lake Michigan Credit Union, which for the last four years has been actively pursing the commercial lending market in its home base of Grand Rapids, started courting the Traverse City market last spring.

“Certainly, the demand is there as more and more people are looking to alternatives to the traditional commercial bank,” said a Lake Michigan Credit Union spokesperson. “A lot of our customers have always had a good experience with credit unions and felt that they’ve been well taken care of over the years.”

Competition for those business customers will be a bit stiffer with the recent merger of Traverse City-headquartered Members Credit Union and Baywinds Federal Credit Union based out of Charlevoix.

The new institution – renamed 4Front Credit Union – holds $430 million in assets and has a combined membership base of approximately 75,000 members, according to Marc McKellar, director of retail banking services at 4Front in Traverse City. It is now the largest local credit union north of Midland/Mt. Pleasant.

“During the recession, commercial lending among banks was tightened up considerably,” he said. “The banking market became extremely conservative, raising lending standards and causing problems for a lot of people who needed to continue to do business but couldn’t get the capital they needed to do so.”

Peg Klein, director of loan operations at TBA Credit Union – which last summer put the final touches on its new regional headquarters building on E. Front in Traverse City – said although commercial lending is not new, it is becoming more visible and in demand from members.

“We’ve been doing business lending for a few years now,” said Klein. “But we’re getting more requests.”

Klein isn’t entirely certain what is driving the demand, although she pointed to the fact that more small businesses are opening their doors.

“Coming out of the recession, a lot of people are becoming self-employed, and we’re seeing more business out of requests from members who have taken that route.”

Klein said while TBA’s business portfolio is still a relatively small percentage of its overall lending she expects that to change over time.

“We’re just starting to grow and we’ve partnered with an outside third party firm to help guide us,” said Klein. “We’ve had a positive reaction to our getting the word out that these are services we are able to provide. And we’ve been able to win business back.”

Having complementary services such as payroll, business mortgages, and lending for equipment purchases is part of Klein’s strategy for growth at TBA.

Business lending growth by credit unions in the local market is reflected in national statistics. According to the Credit Union National Association (CUNA), 12 percent of the 6,557 credit unions in its database are listed as business lenders. That percentage is nearly double in Michigan, where 21 percent of credit unions – 158, according to CUNA statistics – have business lending as part of their portfolio.

Some of those credit unions also have an extra level of support and safety net for their business lending activities, such as Credit Union ONE, which has a branch in Traverse City but is headquartered in Ferndale.

The Michigan Business Connection (MBC) is a credit union service organization that was formed in 2004 to underwrite business loans for credit unions, essentially spreading the risk of a portfolio that an individual credit union may find too big to handle on its own.

MBC, which collaborates with about two dozen credit unions, including Baywinds (now 4Front) in addition to Credit Union ONE, has more than $400 million in its loan portfolio.

One of the newest credit unions in the Traverse City market is Saginaw-based Team One Credit Union, which opened its local office about six months ago. John Hyatt is its commercial loan officer, coming to the credit union after working for several years at area banks including Fifth Third.

He also pointed to the rigors of the recession as having played a part in the resurgence in commercial lending among credit unions.

“Credit unions were doing lending before the recession, but the large regional and national banks have simply not been able to meet the demand for credit services in their communities,” said Hyatt. “And that’s become an opportunity for credit unions and small community banks.”

Larger commercial banks, he said, have shown a reluctance to lend on projects involving investment real estate – the so-called “non-owner occupied” category.

“We’ll look at anything as long as there’s cash flow and collateral,” said Hyatt.