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Community Business Lenders targets small-business market


When James Meinecke needed a business loan to expand his company’s small fleet of driver-education vehicles, he initially applied at a local bank.

After waiting four weeks without hearing back on a loan approval, Meinecke, the owner of Street Smarts LLC, found out about a new commercial lending program offered by Community Choice Credit Union. Within seven days, Meinecke was approved for a loan underwritten by Community Business Lenders, a for-profit partnership that provides business-lending services to Iowa credit unions.

Formed in February, CBL is a partnership of Johnston-based Community Choice, Members1st Community Credit Union of Marshalltown and the Iowa Credit Union League.

Though the initiative is just seven months old, Community Business Lenders already has several million dollars’ worth of loans in its pipeline, said Mark Kilian, CBL’s chief executive officer.

“We are entertaining loan requests both by current credit union members and loan requests from non-members who would become members once we put the financing together for them,” Kilian said. “So we’re seeing business opportunities from both those sources.”

Iowa credit unions’ attempt to expand their business loan portfolios, which they say is an effort to serve small businesses that banks aren’t adequately serving, mirrors national trends. Last year, 41 similar programs were launched that reached more than 1,600 credit unions. Meanwhile, overall member business loans by credit unions, which made up less than 3 percent of credit unions’ loan portfolios in 2004, grew by 34 percent to reach $12 billion, according to Callaghan & Associates Inc., a Washington, D.C.-based group representing the credit union industry.

The presence of several of the state’s large and mid-sized credit unions’ headquarters in Greater Des Moines was among the reasons for basing Community Business Lenders here, said Murray Williams, director of strategic alliances and public affairs for the Iowa Credit Union League.

“Their members come through (the credit unions’) doors and say, ‘You know, we have our personal accounts with you; we want to do our business with you,’ but they did not have the infrastructure in place to service them,” Williams said. “So (the credit unions) came to the league over two years ago, and we started trying to figure out the best business model that we could offer.”

CBL provides underwriting, documenting, closing and servicing to affiliated credit unions, but the funds being loaned are those of the credit union, plus in some instances other credit unions brought in by CBL to participate in the loan.

“We emphasize to the business that we’re providing service and counsel to the credit union, but it’s the credit union that’s reinvesting in your business locally,” Kilian said.

Though a handful of credit unions in Eastern Iowa have provided member business loans for a number of years, “Community Business Lenders allows smaller credit unions an opportunity to get involved in member business lending that haven’t in the past,” Kilian said. With an average cost of $300,000 to start a program, “the cost of getting started with your own initiative is significant, and there are also staffing issues and regulatory limits on the total number of member business loans that can be made. So this really provides them an opportunity to provide a new service to their membership without an extensive investment upfront, with access to the expertise of our staff at no cost to them.”

Kilian, a certified public accountant with a background in commercial lending with Des Moines banks, also worked in the corporate world as chief financial officer of Des Moines-based Annett Holdings Inc., the largest privately held flatbed transportation company in the United States. Prior to joining Community Business Lenders earlier this year, Kilian owned a financial consulting firm that specialized in helping small businesses secure financing.

“So that made my transition fairly seamless,” he said. Also, “I was certainly confident that there was a niche to serve.”

Working with Kilian are Jim Harrington, formerly vice president of commercial lending for Regions Bank and prior to that, owner of James Capital Corp., and Cathy Bishop, who owned and operated a construction services company in Tucson, Ariz.

So far, 16 Iowa credit unions have signed agreements with CBL to use its services, with several more are in various stages of review with their boards to enter into formal agreements, Kilian said.

“The pleasing thing from my standpoint is the diversity of those 16 credit unions. They’re from all across the state, and represent credit unions as small as $5 million in total assets to in excess of $1 billion,” he said. “I think that speaks to the two years of league research that went into this.”

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