MUSKEGON — A small credit union on the lakeshore has moved into commercial lending for small businesses.
Route 31 Credit Union, formerly Muskegon Co-op Federal Credit Union prior to a name change last August, recently launched commercial lending in response to demand from members who own small businesses.
With two offices in Muskegon County and $88.4 million in total assets at the end of 2022, the credit union until now has primarily been a consumer and home mortgage lender, CEO John Rupert said.
“We’re brand new in this and dipping our toes in the water,” Rupert told MiBiz. “We felt pretty saturated in the consumer loan space and we’re doing real estate mortgages at a premium pace. We’ve had a demand from our membership where we have a lot of small businesses that have had to get their financing through a bank or another credit union. They’re like: ‘We like doing business with you. What can we do?’”
Route 31 Credit Union is working with Kalamazoo-based Element 22 Commercial Group LLC, a credit union services organization that provides commercial lending assistance and underwriting to lenders.
By entering commercial lending, Route 31 joins several credit unions across Michigan that provide business loans. Through the third quarter of 2022, the credit unions in Michigan that do commercial lending grew volumes by nearly 28 percent over a 12-month period, according to data from the Michigan Credit Union League.
Route 31 Credit Union originally planned to launch commercial lending later in 2023. The credit union expedited plans when a long-term member who owns a family-run services business asked about a commercial loan, Rupert said. The company’s request for a $75,000 line of credit that’s going through the approval process is the credit union’s first commercial loan, he said.
“It’s a relatively small loan for us and it’s an easy loan for us to get into the program,” Rupert said.
Offering commercial loans to member small business owners follows the 10,000-member Route 31 Credit Union’s name change, solid deposit growth the last few years, an expansion of its field of membership, and earning federal designation in April 2020 as a community development financial institution, or CDFI.
“We’ve had quite a few strategic steps over the one to two years,” Rupert said. “It was just the logical next step.”
Separate from launching commercial lending, the credit union this month received $125,000 from the U.S. Department of the Treasury’s CDFI Fund to support technical assistance for loan programs geared toward the underserved.
Route 31 Credit Union is still deciding exactly how to use the CDFI Fund grant, its first ever, Rupert said.
The technical assistance the credit union decides to provide using the federal funding could complement and support commercial lending, as well as consumer and residential loans, he said. The credit union tentatively is considering having more staff trained and certified as financial counselors, Rupert said.
“We’re really looking at this helping us to be better at what we do and get more help, more services out to the community, especially our membership concentrated here in Muskegon,” he said.
Statewide, seven CDFIs shared more than $1.8 million the Department of the Treasury awarded for technical assistance in the latest funding round.
Among them were Allegan Community Federal Credit and Grand Rapids-based Grow, formerly known as Grand Rapids Opportunities for Women. They each received $125,000 to provide technical assistance to clients.
“These dollars will provide important capacity building and improved technology to ensure business owners have timely access to capital,” Grow CEO Milinda Ysasi said in an announcement about the funding awards issued by U.S. Sens. Debbie Stabenow and Gary Peters. “We are committed to elevating entrepreneurs and creating community impact through business ownership.”
The Michigan Women’s Foundation, based in Detroit with an office in Cascade, received $560,000. The foundation intends to use the CDFI funding to “provide loan capital and infrastructure support to our target population — African American women and low to moderate (income) people from distressed census tracks [sic] throughout Michigan,” President and CEO Carolyn Cassin said in a statement.
Additionally, the CDFI Fund announced $17.1 million in financial assistance awards via its Native American CDFI Assistance program. One Michigan Native CDFI, Dowagiac-based Chi Ishobak Inc., received $975,000 in financial assistance awards, which it can deploy as lending capital, among other uses.