Relationships drive commercial deposits

While commercial lending drives revenue, credit unions should also seek out commercial deposits.

“Business lending is much more about relationships than mortgage or consumer lending,” says Dan McCullough, senior vice president, small business lending, at $7.5 billion asset MIDFLORIDA Credit Union in Lakeland, Fla. “In the long run, you want to earn their deposit accounts as well. It’s ‘inventory’—a good way to fund your loans.”

A white paper from the America’s Credit Union Lending Council provides several tips for growing commercial deposits:

• Understand business deposits aren’t consumer deposits and can’t be treated the same way. Business deposits are more complex and may have different compliance requirements, McCullough says.
• Take advantage of the opportunity to expand marketing to commercial borrowers. Include deposits as part of the pricing model for lending, and have a suite of products commercial borrowers are seeking from a financial institution, such as automated clearinghouse, remote deposit capture, online access, and bill pay.
• Consider hiring or contracting business deposit experts in addition to lending experts.
• Provide incentives for staff to attract deposits with every commercial loan. This will ensure loan-to-share ratios stay at healthy levels.

“Credit unions can’t afford to keep lending millions of dollars to borrowers that have $5 in deposits,” says Joe Hyatt, president/CEO at Development Financial Training and Consulting Inc.

“We expect that the business will bring over its entire relationship,” says John Arnold, vice president of business services at $2.7 billion asset AmeriCU Credit Union in Rome, N.Y. “If we’re providing a working line of credit, we’re their primary financial institution and can expect most, if not all, of their deposit accounts.”