This blog is based on an expert discussion at our Summer 2022 Brainstorm Event. Register to attend our next one now!

Small- to medium-sized businesses (SMBs) are a desirable but largely untapped resource as far as credit unions are concerned, not only as new loan sources, but also as a pool of potential new members.

What’s holding credit unions back from going after these small “big fish”? Panelists at the CU 2.0 Brainstorm Event share their insights and different strategies for tackling the main issues

Lack of appropriate talent, need for innovation, and shifting perspectives to creating symbiotic, long-term relationships with businesses within the community.

Watch the video below to catch the whole thing, or read on for a short summary.

Finding Talent to Create and Maintain Relationships with Businesses

Frank Wasson, CEO at CommonWealth One Federal Credit Union, opens the discussion with his observation that leaders often underestimate the level of talent commitment it takes to be successful in the space, and aren’t always willing to invest in solutions to make it happen.

Co-Founder at Quilo, Don Shafer, echoes similar sentiments, stating that someone in high-level management has to see the potential benefit and make the decision to go after it.

As Mark Ritter, CEO at MBFS, points out, building relationships with businesses is a marathon process and is often overlooked in favor of shorter avenues to success. Leadership has to take the reins and deem relationship-building important enough to allot the necessary time and resources to achieving this goal.

Lending and the Small Business Experience

One underutilized opportunity, according to Tom Hurwitz, CEO at ACR Funding, lies with businesses that are credit-challenged who also need (and deserve, as he says) a chance to obtain business capital. Even though these businesses may not meet the right lending criteria for the credit union, they can still offer assets to the institution in the form of new members.

Offering financing products to their customers can help credit unions tap into a wellspring of potential new members and new loans, at the same time providing financial support to the businesses in a symbiotic relationship.

It also works the other way around. Wasson maintains that credit unions can use their current members to benefit SMBs and partner with them to create a culture of “buy local, spend local” within the community.

Rahul Kumar, Head of Banking Strategy at TalkDesk, discusses the need to create a personalized experience for small businesses. Small business owners these days want an experience similar to the member–that is, one in which the financial institution understands the needs of the business to proactively make tailored recommendations instead of a standard, one-size-fits-all model.

Ritter further emphasized the need for improved business member experiences, citing deeper issues with the way that credit unions tend to isolate business services from the rest of the organization. All staff, branches, and call centers need to be able to have meaningful conversations with business members the way they do with individual members, treating them the same while addressing their specific needs.

Hurwitz adds that there’s a lot of competition for credit unions, but it all comes down to time in the eyes of the small business owner. How long will it take to get approved for a loan? How soon will funds be available? Offering low rates, speedy approval, better products, and stellar customer service is key to retaining small businesses and their owners.

Offering Value to SMBs

Chris Otey, panel facilitator and CRO at CU 2.0, points out that credit unions have to be willing to solve the issues themselves. He encourages embracing the current (if outdated) core solutions and plugging in supplemental solutions to take a proactive approach instead of waiting for big banks and competitive fintechs to solve the problems first.

However, partnering with cooperative fintechs to diversify offerings and give members the features they want could be a viable option to ensure you’re meeting member needs and ultimately keeping them happy, according to Hurwitz.

Kumar offers KeyBank in Ohio as an example of a financial institution doing a great job positioning themselves as a champion of small businesses in their community. What differentiates KeyBank in this arena is that they acknowledge that one-size-fits-all solutions don’t work and make significant efforts to get to know the needs of their members prior to onboarding to guide the process.

Wasson suggests that credit unions have a unique opportunity to partner with local businesses to help them solve problems that they are struggling to solve themselves, like labor issues and foot traffic issues. Credit unions can provide value beyond the loan and make a difference by solving issues in the present.

Further Discussion

Facilitator Chris Otey asks the panelists for insights regarding how credit unions can target small businesses and define small business segments. Here Ritter enthusiastically offers his experience-based insights, stating that credit unions should be looking at four different areas of businesses and strategizing around them separately:

• Residential real estate
• Commercial real estate investors
• Operating small business (ones that are making something and selling it or providing a service)
• Nonprofits (i.e. charities, churches and government orgs)

He also points out that credit unions don’t have to go far to find small business clients to pilot a new business acquisition program or improve an existing one. Around 10% of a credit union’s member base is already made up of business owners (or owner-adjacent members) that are using their personal banking products. Using these existing relationships to your advantage when developing solutions or shifting focus is more accessible than seeking out willing guinea pigs from the community.

The small business market can also provide access to new resources for credit unions that don’t currently offer commercial services. Retail-only financial institutions can partner with business owners by offering instant-decision financing products to their consumers at the point of sale, according to Shafer.

Audience member Max Sobkin asks another essential question: how do credit unions use data to define who they’re targeting?

Wasson says that many financial institutions already have the necessary tools to make this definition and decide where to go next–by analyzing member data to see where members are shopping locally, you find the businesses to start forming relationships with. He adds that when building a relationship, digital interactions are often seen as impersonal and inauthentic. His organization is currently repurposing a previously member-focused team to create real-world connections with businesses.

The discussion wraps up with Otey calling on various panelists and audience members for their final thoughts, which all seem to echo the message of developing specialized experiences, products, and relationships with small businesses to create shared benefits and support the community.