While opportunities may slow in 2020, these strategies can help enhance loan growth, member retention and the efforts of your staff.
Many economists continue to predict slower GDP growth in 2020 than the previous two or three years. This poses a potentially significant challenge to a credit union aiming to grow its loan portfolio during the next 12 months. However, there are certain strategies that can be deployed to nurture growth in any economic cycle.
Here are five methods to consider when attempting to grow your loan portfolio, even as the current cycle begins to slow.
1. Develop Lending Specialties That Cater to Niche Industries
Expand your service offerings to solutions that cater to specific needs, such as working capital finance, government guaranteed finance or lending to niche industries. Loan portfolio growth may require that your lenders study new markets, or that you acquire new technologies that will support such strategies. These efforts can pay significant dividends for years. The first step is to thoroughly examine your market for existing and emerging industry trends and opportunities.
2. Study Your Member Relationships More Closely
Your lending officers are probably very familiar with the commercial client base within your credit union. But, are they as familiar with your retail members’ financial goals and ambitions?
Of the more than 30 million small businesses in the U.S., about 24 million are non-employer firms. That means that on paper they look very similar to members. Even though they don’t have a payroll, they still might want to grow.
Chances are, many are funding that business through personal savings and personal credit. Until now, most of these members have been unaware of the products and services their credit unions can offer. Your branch personnel are typically the best informed to guide lenders to these potential opportunities to help cultivate and grow small business relationships in the future.
3. Widen Your Net
Physically expand your market, either directly or through loan participations. A benefit of commercial lending technology is that it has enabled lenders to more closely monitor their commercial portfolios, which is especially true of collateral and portfolio management systems. Third-party data sources can also proactively arm you with business health scores daily.
Many of these same technologies allow you to grow your loan portfolio through participation networks. Economic expansion does not occur everywhere at the same rate. Some regions may be growing steadily while others are struggling. If your region is not growing, collaborating with other credit unions in higher growth regions can be a valuable way to learn best practices and strategies.
4. Enhance Your Business Retention Efforts
Get closer to your existing commercial clients. Make sure you understand the challenges and opportunities your business members are facing. At its core, commercial banking is about helping your members face their own challenges. Retention visits to existing clients are always critical, especially when economic cycles are changing. And when those tough times occur, it’s important that credit unions are spending limited resources on existing clients. In addition to strengthening relationships, retention visits can also result in referrals that further support your loan portfolio growth strategy.
5. Expand Your Web Presence and Your Social Media Efforts
This is no longer optional for credit unions; it’s necessary for survival. You should have dedicated marketing personnel in place, either as an employee or a consultant, to develop or refresh your comprehensive strategy, including social media. This involves posting regularly and providing subject matter experts who can create content and nurture market awareness for your credit union. You may also be able to leverage your vendors and their own social media strategy by sharing their content. Increased brand awareness can also help attract new clients.
While 2020 may not offer as many loan portfolio expansion opportunities as we have seen in the past few years, these strategies can help enhance both loan growth and client retention, in addition to better leveraging one of a credit union’s biggest strengths—your own team of professionals.
Pat True is a senior risk analyst with the lending solutions division of ProfitStars®, headquartered in Allen, Texas. A 25-year veteran of the financial industry, True is the author of numerous banking journal articles and frequently published on Jack Henry & Associates’ Strategically Speaking blog.