wlm4 at cornell.edu (Will
02-13-1995, 10:41 AM
>From what I understand, it is illegal for credit unions to make business
loans, even to coops.
> Bill Long
This is a widely held misconception. Section 701.21 of the Rules and Regs
lays out the parameters for Member Business Loans. Many of the restrictions
are safety, soundness, and documentation. Section 701.21ii.B allows loans
to non-profits (including coops) without the requirement of a personal
guarantor.
Our Credit Union has specialized in lending to self-employed,
micro-enterprise, home business, mom&pop stores, and startup cottage
industry. We feel that self employment is a viable path out of poverty.
I have attached below a couple of pages from our training manual for CDCUs
entering into this type of small business lending.
The purpose of this booklet is to outline a micro-enterprise lending program
for community development credit unions.
It is our feeling that business lending is:
1) an important part of community development.
2) based on the same skills needed to originate consumer loans and run a
credit union.
3) Inherently more risky than consumer and mortgage loans, but can be
priced to be just as profitable.
What is a small business? Size is of course relative, so a small business
is one that is smaller than the credit union.
Generally, the market defines a small business as one which has sales below
$1 million a year. A small business is one which has lending needs within
reach of your credit union. If you lend to a business substantially bigger
than the Credit Union, it could be said that business and not the total
membership own the Credit Union.
The essence of our approach to small business lending in entrepreneurial.
Look for an under served market and design services to meet that need.
Start slow, maybe limit your lending to pickup trucks and delivery vans.
Have the same limits as car loans. After you get some experience, consider
lending for larger trucks. Or if you have many green grocers in your area,
start by offering them a line of credit with the same limits as your
personal lines-of-credit. Drive the tool supplier crazy by offering small
loans for tools purchases.
Don't try to do everything. Find a size and type of loan you can handle.
Whatever particulars, start small and start from what you are successful
with. AND don't skimp on evaluation and documentation procedure just
because the loans are small. This is where you get a feel for the process.
Make your mistakes and learn the lessons before the loan amounts get too big.
What does a small business want from you that a bank can't give? It should
certainly NOT be much looser credit terms or less review. It can be that
you care to give personal service to small business, that you have knowledge
and advisory skills. It can be that you believe in relationship banking, in
a teamwork. It can be that you are convenient.
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
This post transferred from the cdb-l mailing list
loans, even to coops.
> Bill Long
This is a widely held misconception. Section 701.21 of the Rules and Regs
lays out the parameters for Member Business Loans. Many of the restrictions
are safety, soundness, and documentation. Section 701.21ii.B allows loans
to non-profits (including coops) without the requirement of a personal
guarantor.
Our Credit Union has specialized in lending to self-employed,
micro-enterprise, home business, mom&pop stores, and startup cottage
industry. We feel that self employment is a viable path out of poverty.
I have attached below a couple of pages from our training manual for CDCUs
entering into this type of small business lending.
The purpose of this booklet is to outline a micro-enterprise lending program
for community development credit unions.
It is our feeling that business lending is:
1) an important part of community development.
2) based on the same skills needed to originate consumer loans and run a
credit union.
3) Inherently more risky than consumer and mortgage loans, but can be
priced to be just as profitable.
What is a small business? Size is of course relative, so a small business
is one that is smaller than the credit union.
Generally, the market defines a small business as one which has sales below
$1 million a year. A small business is one which has lending needs within
reach of your credit union. If you lend to a business substantially bigger
than the Credit Union, it could be said that business and not the total
membership own the Credit Union.
The essence of our approach to small business lending in entrepreneurial.
Look for an under served market and design services to meet that need.
Start slow, maybe limit your lending to pickup trucks and delivery vans.
Have the same limits as car loans. After you get some experience, consider
lending for larger trucks. Or if you have many green grocers in your area,
start by offering them a line of credit with the same limits as your
personal lines-of-credit. Drive the tool supplier crazy by offering small
loans for tools purchases.
Don't try to do everything. Find a size and type of loan you can handle.
Whatever particulars, start small and start from what you are successful
with. AND don't skimp on evaluation and documentation procedure just
because the loans are small. This is where you get a feel for the process.
Make your mistakes and learn the lessons before the loan amounts get too big.
What does a small business want from you that a bank can't give? It should
certainly NOT be much looser credit terms or less review. It can be that
you care to give personal service to small business, that you have knowledge
and advisory skills. It can be that you believe in relationship banking, in
a teamwork. It can be that you are convenient.
************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********
This post transferred from the cdb-l mailing list