Sep 06 2013

Microloan Feasibility Study: Can Small Business Lending Become Big Business for Credit Unions?

Report  
Number  
305

Loans are credit unions’ biggest income sources, and with historically low loan-to-share ratios and interest rates, credit unions must generate new loans. This report explores microlending and suggests practices that will help credit unions leverage this member service and income source.

Dave Grace
Managing Partner
Dave Grace & Associates
Report Number 305

Executive Summary

While many credit unions nationally have an interest in entering or expanding business lending, many are overlooking the untapped and potentially profitable area of microloans. A microloan to a fledgling business can be a gateway to a long-term financial partnership that’s profitable for credit unions and helpful to members. This is a new business opportunity for credit unions.

This research illuminates market conditions, borrower demand, and lending characteristics that suggest microloans and credit unions might be well suited to one another.

What is the research about?

In the report, international microfinance expert Dave Grace—a small business owner himself and former senior vice president of WOCCU—examines the opportunity for US credit unions to form lasting partnerships with growing businesses through microlending.

What are the credit union implications?

Today's small businesses are tomorrow's big businesses. Your loan to a small business owner can not only keep that person in business now, but be the foundation of a lasting relationship as the business grows and prospers. Small business owners often struggle to obtain credit from large banks, and there are fewer and fewer community banks around to fill these borrowing needs. This research illuminates market conditions, borrower demand, and lending characteristics that suggest microloans and credit unions might be well suited to one another.

This report is sponsored by CU Strategic Planning.