ERIE, Penn.-A novel indirect lending program for a wide variety of consumer products, combined with an aggressive marketing and community outreach campaign, has led to big results for one CU here.
Erie FCU has seen its business lending portfolio swell from $275,000 in 2007 to nearly $8 million by the end of 2009 and more than doubled its number of "Business Affinity Partners," the term it uses for SEGs.
"When I was going out to recruit new businesses to join the credit union (in 2008), they were telling me about how they were struggling in this economy," VP of Business Development Sandi Carangi said, explaining that area businesses were chiefly concerned with their customers' lack of credit access. "A lot of the credit companies they were going through were no longer approving loans to anyone had a credit score of 700 or below." In response, Carangi spent the better part of six months researching and creating a new indirect lending program for businesses such hot tub and pool installers, water purifier suppliers, furniture builders and home remodelers. The credit union's merchant direct lending program offers consumer loans at one percentage point off its usual risk-based- priced loans for purchases between $500 and $15,000.
"These (other lending) companies they were going through were all charging the businesses a fee that was 3% to 5% of the loan. And the loans they were offering to the customers were at 21%," Caringi noted.
With Erie FCU's program, "the business does not have to do anything with the loan, all they need to do is hand out the application. We did not change our lending standards. We still have the same risk-based lending model. It's just like anyone else who came through the door... it's just that they're going directly to the business now instead of having to come to our office."
Just one year after its inception, the program already includes 20 businesses, all of which are new Business Affinity Partners as well.
The CU also doubled its SEG base by ramping up community involvement-increasing attendance at festivals, trade shows and SEG employee appreciation days.