BY JOSH GLOVER
There is no time quite like when you’re flipping burgers on the grill and splashing around in the pool to be thinking about your credit union’s business loan portfolio. The insights and strategies that follow will help you cook up a second half of your CU lending year to perfection.
Summer is a time for barbecues, pool parties and family vacations. It is also a great time to plan your credit union’s strategy for growing your business lending portfolio in the second half of the year. Here are a few areas of exciting opportunity in member business lending. Let’s brush off the grill and turn the flame on high!
Cooking with Gas: NCUA’s New MBL Rule
In February, the National Credit Union Administration (NCUA) enacted a major and welcome reboot of its MBL rule, replacing the agency’s long-held “prescriptive-based” philosophy with a more flexible “principles-based” approach.
Some highlights of the final rule include:
- Ability to waive personal guarantees
- Removal of explicit loan-to-value limits
- Lifting limits on construction and development (C&D) loans
- Exclusion of non-member business loan participations from the MBL cap
- Elimination of the onerous waiver process
The first provision of the new rule to be implemented is the automatic personal guarantee waiver. It went into effect May 13, 2016; all other provisions will be implemented January 1, 2017.
“The appropriate use of the personal guarantee waiver is among the greatest opportunities credit unions have to meaningfully connect with their business members,” says Larry Middleman, president and CEO of CU Business Group, LLC, a business services CUSO that serves over 500 credit unions in 46 states. “But it is important to use this newfound flexibility judiciously and not simply for the sake of ‘being competitive’ with the bank up the street.”
Middleman cautions that most business loans still warrant the obtaining of personal guarantees from all owners, unless there are mitigating factors such as strong collateral positions, significant business cash flow and a long-term track record of success in the industry.