SAN JUAN CAPISTRANO, Calif. – Credit union consulting firm Counter Intelligence Associates is launching what it believes to be the first comprehensive member business lending training program in the industry, and it has established a correspondent relationship to give CUs instant access to the MBL market. Diane Johnson, CEO of Counter Intelligence Associates, said credit unions want to get deeper into member business lending, but a shortage of business lending expertise is keeping them on the sidelines. Part 723 of NCUA's Rules and Regulations requires credit unions engaging in member business lending to have someone on staff with 24 months of training or experience in commercial lending. CIA, in partnership with St. George Integrated Financial Services, is launching a 24-month training course that is broken up into 12 modules. "It's absolutely soup to nuts, from application and funding to follow-up collection and analysis of annual data," said Johnson. "Everything we're seeing is that there's tremendous interest in member business lending. NCUA wants credit unions to explore it, but there are so many caveats, many credit unions don't know where to start," said Johnson. Johnson said CIA is already taking reservations, with classes scheduled to start in January. The classes will be provided regionally around the country as demand dictates. She said the program exceeds NCUA's minimum requirements for MBL. While CIA is not required to run the program by NCUA, Johnson said it will anyway. She said CIA attorneys are currently reviewing the program to ensure its in full compliance with NCUA's regs. "What we lack in the industry is the expertise component. The only place we can find the expertise is to go out and get these people out of the banking industry," said Johnson. "There's an entire market of small businesses not being served by the community banks or even the regional banks." The training module is just one aspect of CIA's new MBL program. It is also partnering with St. George to give CUs an immediate entry into MBL by using St. George's commercial lending expertise to process and underwrite CU member business loans. Under this program a credit union would gather a member's application and pertinent material and pass it on to St. George to process. St. George will make a recommendation on whether or not to fund the loan. If the CU decides to provide the member the loan, it can do so on its books, or it can pass it on to St. George to sell off to another institution. Conceivably, a CU could continually pass on member business loans in order to meet member demand, yet not keep the loans on their books. "St. George behaves much like a correspondent like Countrywide is for real estate. This enables credit unions to get into business lending immediately. The reg permits credit unions to go outside to a third party provided all the due diligence is met," said Johnson. Johnson said even if the CU doesn't keep the loan on its books, it benefits from fee income provided by St. George, and satisfying the member. Michael Hales, president/COO for St. George IFS, said credit unions that are looking to get into business lending face a personnel problem. "There is a chronic and systemic shortage of commercial loan officers. Many of the old training grounds are gone. All the commercial loan officers used to come from Wells Fargo, Hibernia, Amsouth and other big banks. A lot of these programs have been centralized into a consolidated lending environment," said Hales. St. George provides commercial lending services to about 35 financials, most of which are community banks. Hales, a veteran of the banking industry, said banks aren't doing enough to meet the financing needs of small businesses. "The thrift industry is converting more to commercial lending. Bankers are slow to change. They are reluctant to let go of things they've done for years, like take a look at their credit analyses for business lending. Credit unions want to get involved, but don't have the resources banks do," said Hales. Johnson said credit unions are doing a lot more business lending than they realize. "If you're making home equity loans, you're making loans to small business owners. They are the ones that really don't have a good market to go to. They're not looking for a million dollars; they may need a hundred thousand or less." While most credit unions don't have official business lending programs, there are some success cases around the country, such as The Business Lending Group, Inc., a CUSO owned by three Wisconsin CUs – Banta Community CU, CitizensFirst CU, and Fox Communities CU. In operation for just two years, BLG has processed 158 loans for approximately $50 million. "There are an awful lot of credit unions that are financing businesses inadvertently. Members are taking out a second mortgage or home equity loan. We fund directly to the business, rather than having the member take it out of their personal sources of cash," said Dave Coggins, president/CEO of BLG. Coggins said CUs have more hoops to jump through than other financials. "The credit union regulations have some restrictions that are at times problematic. We have not let them stop us or become insurmountable. But there are some regs that our competitors, the banks, don't have to deal with," said Coggins. Examples include the loan amount can't exceed 80% of collateral; unsecured business lending is prohibited; personal guarantee rules are strict; tougher appraisal requirements; and others. [email protected]