Orlando Business Journal
Jan. 29 - Feb. 4, 2010

Credit Unions Pump Up Business Loans
By Christopher Boyd

Ron Legler Recently asked two banks for a loan for the Florida Theatrical Association to buy and renovate a downtown Orlando building for its headquarters and community theater.

One said no, and the other offered difficult terms, said the association president and CEO. So he turned to a credit union for a $1.5 million - $2.3 million loan, which he got. "The terms were better," he said, making it "a very simple decision."

He's not alone in seeking a business loan from a credit union from a credit union, even though most of them focus on consumer loans.

Half of Central Florida's 10 largest credit unions made business loans in 2009, and all but one, Fairwinds Credit Union, increased their business loan volume in the wake of commercial bank cutbacks on lending.

Those four credit unions grew their business loan portfolios by a combined 81 percent from $59.1 million in fourth-quarter 2008 to $107 million for the same period in 2009.

"We are getting more inquiries about business loans," said Bill Dagnall, lead business lending officer for Navy Federal Credit Union, Central Florida's largest credit union. "I attribute this to the credit freeze elsewhere."

The reason for the credit crunch: Many commercial banks, especially those that made a lot of real estate loans during the boom from 2004 to late 2006, now have a lot of bad loans on their books. So they've had to shift capital into loan-loss reserves, making it harder to make new loans.

Groups that counsel small businesses are beginning to suggest credit unions as financial alternatives.

"Lending requirements are very tight now, and it makes sense that credit unions are getting into business lending," said Skip Honigstein, Central and North Florida district director of small-business assistance group SCORE.

Navy Federal led the pack in Central Florida, growing its overall business loan portfolio to $92.5 million on Dec. 31, 2009, up 75.5 percent from $52.7 million for the same date in 2008.

Next up was Insight Financial Credit Union, which increased its business loan portfolio from $1.6 million to $8.1 million during the December 2008-to-December 2009 period.

Insight is filling a void created when commercial banks clamped down on lending after the fall 2008 financial sector meltdown, said Insight Vice President Todd Mellenberndt.

Central Florida Educators grew its business loan portfolio during the second quarter last year, but none since. Ed Wysokowsky, the credit union's consumer lending director, said that's because most of its customers work for schools.

The fourth local credit union that grew its business loan portfolio in 2009, McCoy Federal, couldn't be reached for comment.

Meanwhile, Fairwinds Credit Union made a lot of business loans in 2009, although its overall business loan portfolio decreased when compared with 2008.

Fairwinds President Larry Tobin said he wants to increase the business loan balance to $100 million this year, up from $75 million in December. "We have sufficient deposit growth, and we would like to increase lending."

Credit Union Total Business Loans
(Dec. 2009)
Year-Over-Year Change
Navy Federal Credit Union $92.5M +$39.8M
Insight Financial Credit Union $8.1M +$6.5M
Central Florida Educators Credit Union $5.1M +321,000
McCoy Federal Credit Union $961,000 +$961,000
Source: National Credit Union Administration