New Jersey Credit Unions Target Small Business

CU360
March 18, 2008 | COMMENTS

New Jersey has more than 200,000 small businesses, and an increasing number of credit unions are lining up to help meet their financing needs.

"During the past few years, more credit unions have instituted lending and other programs that target small businesses," says Christian Abeel, director of government affairs at the New Jersey Credit Union League. "There's growing demand for our services in the small-business market," he tells NJBIZ magazine.

"We're seeing more credit unions enter this segment," says Patrick McDermott, assistant vice president of business development for Affinity Federal Credit Union in Basking Ridge. Some credit unions, however, simply don't have enough employees with experience in writing business loans, he adds.

An additional challenge is commercial loans tend to be more complicated than consumer loans, notes Jon Friestedt, Affinity's chief lending officer. "A business loan involves a lot more than a credit report," he says. "Underwriters have to complete a cash-flow analysis based on a review of the company's financial statements, and they also need to understand industry trends and seasonal variances that could affect the business." About two years ago, Affinity expanded its loan department and hired people dedicated to commercial loans.

Some New Jersey credit unions are ramping up their business services by outsourcing the function to a third-party specialist like East Coast Business Lenders. The company provides financial analysis and underwriting, loan documentation and servicing, and other services for credit unions.

"Commercial loans are usually highly customized compared to consumer loans," says Kathie Stone, chief executive officer of East Coast Business Lenders. "So credit unions need people who have a thorough understanding of the loan practices and of the needs of the business borrower. We offer credit unions the ability to take advantage of our experience and quickly implement the new loan services, instead of having to train their own people."

Affinity Federal Credit Union has, for example, provided a number of outsourced loan services to ESS Home Theater Showroom and More, including more than $200,000 in financing for inventory, the build-out of a 2,500-square-foot showroom, and for other business-launch purposes. "We previously dealt with a bank," says ESS owner Donald Coords, "but Affinity is more tuned into the needs of local small businesses."

Paragon Federal Credit Union in Montvale , New Jersey , is also pursuing the business market. "Paragon and other credit unions have more of a personalized, one-on-one focus, helping small and mid-size business to not only compete but to flourish as well." says Michael Puzycki, assistant vice president and director of marketing.

Besides loans, Paragon offers credit cards, debit-check cards, and branded gift and loyalty cards. Merchant services also include check verification and electronic checking. One recent success story involves Alpine Limousine Service, whose owners have worked with Paragon since 1999 when they began the company. The limousine company now owns 65 vehicles, and in late 2003 the credit union helped finance their purchase of a 5,000-square-foot building for company headquarters.

By serving business clients, credit unions can reach consumers who otherwise would not use their organization. "Getting business customers lets a credit union diversify its assets," notes East Coast Business Lenders' Stone. "It also lets the credit union minimize its credit risk."