A new year means reevaluating goals and setting new ones. For many in business lending, this means having a new amount of business you are expected to bring in by the end of 2016. To borrow a contemporary cliché, it is time to work smarter, not harder.
Instead of racking your brain on how to find the same competitive business that is harder to find every year, consider shaking it up and trying some new ways to book quality business loans. It is the 21st century, and it is time to start lending like it.
Your Maximum Loans to One Borrower Is No Longer a Problem
If you have good members that you can’t lend any more money to, consider participating out the next loan. You can even participate out existing loans, which may be even easier to participate, because they have proven performance. Not sure who to participate with? Contact your local MBL CUSO (that would be us, hint hint…).
And if a large request walks in your door, know you have 10 times the capacity to participate over your max loans to one borrower. If your limit is $300,000, then you can originate a loan of $3 million, and participate out the remaining $2.7 million!
Did I Mention It Is the 21st Century? Buy a Participation Already!
The worst thing your credit union can do is hoard cash. Your credit union needs to be earning interest to pay for overhead. If loan demand is weak in your territory or you have an undesirably large securities portfolio, it is probably time to start buying loan participations to help your income.
Loan officers bemoan participations as something that doesn’t count towards their quota. I think it should count toward their quotas, because managing a successful relationship with a CUSO can take a lot of work when it means making sure the CUSO loans are synching up with your internal loan policies.
Senior management may also have a dislike for CUSOs, thinking they are nothing more than loan brokers. While that may be true for some, it is not the case for all. Make sure you work with a CUSO that is part of the transaction long-term and is not just getting paid for closing the loan. Also, make sure the CUSO has strong oversight, say, from a local group of credit unions on their board (that would be us, hint hint…).
Consider Changing Your Attitude
Fatalism is a self-fulfilling prophecy. If you tell yourself there is too much competition, you will never try your hardest to find business. Dealing with rejection is unpleasant, but this is the world of sales. You will need to accept a lot of rejection before finding success. What separates good loan officers from bad loan officers, is the good ones continue to try hard with a smile on their face, even after being rejected several times.
Changing your attitude also means opening your mind to new lines of business. Learning how to lend in a new industry can open up a lot of business, as does learning to use new tools like SBA guarantees, USDA guarantees, tax credit equity, etc. Knowing something your competitors don’t know how to do gives you a distinct advantage. In fact, a local CUSO could probably help you with this.
No matter how you plan on meeting your quota or finding new business, you should be open to trying something new. You can do this on your own or with help, but the important thing to do is try. Whether or not you are an investor in our CUSO, we are here to help you.