Credit Unions Prep For A Business Funding Demand Upswing

Despite a wave of new surveys and data flooding the market, it’s just about impossible to ascertain businesses’ sentiment in today’s economic environment — namely because each business had a unique experience over the last year and a half.

For some firms, like those deemed essential businesses, business was booming even during shutdowns. Others, meanwhile, struggled but persevered as they adjusted their business models to keep revenue flowing. And others, still, faced tough times that could only be alleviated through government aid initiatives.

It’s set a backdrop for what’s poised to be a fascinating moment in business finance history for the U.S. And while no two businesses can be compared apples to apples, there are some emerging patterns that Murray Halperin, managing member of cuBIZloan.com and president of Biz Lending & Insurance Center, Inc, said will be closely watched by the credit union community.

In a recent discussion with PYMNTS, he described the factors driving demand for financing among companies of all types and how credit unions’ collaborations with FinTech partners in the business finance arena can help connect as many firms to capital as possible.

The Business Climate

With each firm having its own experience amid the pandemic, Halperin noted that examining the current demand for business finance should be taken from an industry-specific approach.

Many deemed “essential businesses” had quite a lucrative year in 2020, and these companies are likely in search of capital to invest in future growth. Meanwhile, companies in industries such as hospitality and food services often struggled during the pandemic, so they’ll be seeking credit as a way to bounce back after a period of turmoil.

Overall, he said, there is an expectation that demand for business funding will grow, particularly as programs like the Paycheck Protection Program (PPP) come to an end.

“There will be plenty of movement out there as this economy grows,” he said, highlighting the role that economic recovery and growth will also play in this demand.

Credit Unions Step In

In anticipation of a surge in demand for credit, cuBIZloan.com, which was formed as a collaboration between New Jersey and Pennsylvania Credit Unions, recently announced a partnership with online business loan marketplace Lendio. For the businesses that seek funding from one of cuBIZloan.com’s credit union partners yet do not qualify for a loan, that credit union will automatically refer the applicant to Lendio to find a proper match.

It’s a reflection of credit unions’ efforts to support the business community as well as of the opportunity for these financial institutions to embrace FinTech collaboration in ways that have grown in popularity with banks.

According to Halperin, not every credit union can offer member business loans (MBLs) and working with a FinTech marketplace like Lendio can help connect those business members of a credit union to funding. Even credit unions that do offer MBLs cannot fund every single applicant, he noted, and collaborating with a third party can ensure that credit unions play a role in connecting more firms to capital.

“If credit unions can find a third-party source that’s quick and easy and it doesn’t affect their core business, why shouldn’t they collaborate?” he said.

Embracing FinTech partnerships can also help credit unions retain their competitive edge in an increasingly competitive business banking segment. Halperin pointed to advantages like a lack of early termination fees on loans or the tendency for businesses to rate their relationships with credit unions more highly than they do with banks as key benefits for credit unions looking to play a role in a potential business funding boom.

With FinTechs and application programming interface (API) integrations, he noted, credit unions can offer the kind of digital-first agile financing experience that companies have come to expect while reinforcing that credit union-business relationship.

“In the customer relationship between the credit union and their members, you traditionally find that relationship scores far better than it does with banks,” Halperin said.