How Credit Unions Can Grow and Diversify Their Revenue Through Small Business Solutions

By NewtekOne
July 25, 2023

Small businesses are a remarkably resilient segment of the economy, continuing to grow despite the challenges of COVID, persistent inflation and more. In fact, according to Bank of America, two-thirds of small businesses anticipate increased revenues and over 80% plan to obtain financing for their business in 2023.

Credit unions who can effectively deliver solutions to this market are poised to capture significant revenue opportunity – and those who do not run the risk of falling behind in an increasingly competitive market.

The SBA has approved over $20 billion in loans in 2023 year-to-date, but credit unions still hold less than 1% of the total U.S. business loan portfolio, according to CU Times.

So how can credit unions capitalize on this opportunity to grow and diversify their revenue through business solutions? Here are a few areas to consider:

Lending Operations

Credit unions can play a significant role in providing funding for a variety of business needs, from working capital to refinancing existing debt. Plus, business loans can help diversify your risk portfolio, especially if your credit union has a heavy balance sheet of consumer loans.

It may seem daunting to build out a business lending operation, especially if starting from scratch. However, a lending service provider (LSP) can help outsource some or even all of your business lending operations, providing the personnel, resources and expertise so you can tap into this valuable market.

To ensure your credit union is set up for success, it’s critical to choose an LSP provider with the track record, expertise and resources for small business lending – not a CUSO that specializes in home equity, auto loans or other consumer products.

Comprehensive Business Solutions

Beyond lending, credit unions can offer a variety of other critical business services, which not only deepen relationships with the business member but also offer additional, non-interest/non-core revenue.

For example, payment processing is the lifeblood of a business and fits naturally within any institution’s small business solution set, giving members a one-stop-shop for their financial solutions. Furthermore, payment processing residuals provide yet another diversified revenue stream for you to stake claim to a U.S. market that is expected to grow to $150 billion by 2030, according to Emergen Research.

Credit unions that deliver cost-effective, turnkey solutions in core business areas – from payment processing to payroll, technology and more – will ultimately win membership and monetize from the small business segment.

Marketing and Branding

Credit unions might assume that only a limited portion of their membership owns or operates a small business. However, according to Oberlo, nearly half (46%) of the U.S. workforce is employed by a small business, meaning it could be more likely than you realize that your members either run a business or know someone who does.

When your members are seeking information about business services, your credit union needs to be top-of-mind. That’s why it’s crucial to promote business solutions on your website, in marketing efforts, and in daily conversations between staff and members. 

Connect with NewtekOne to learn more.