St. Anne's Credit Union (Fall River, MA) provided over $3 million in financing for restaurant project in New Bedford, Massachusetts.
The restaurant, Cisco New Bedford, will be the largest investment in a restaurant project in New Bedford's history.
The owner of the Cisco New Bedford is Stephen Silverstein, who owns to two other restaurants.
The $1 billion credit union will provide nearly $5 million in funding to the three restaurants owned by Silverstein in the New Bedford area.
Read more.
Showing posts with label Commercial Lending. Show all posts
Showing posts with label Commercial Lending. Show all posts
Tuesday, March 3, 2020
Tuesday, January 28, 2020
Bethpage FCU Provides $27.5 Million Loan to Refi Student Housing at University of Maryland
The Commercial Observer is reporting that Bethpage Federal Credit Union (Bethpage, NY) provided a $27.5 million loan to Columbia, Md.-based Star Global Ventures to refinance student housing property at the University of Maryland.
The 10-year, non-recourse debt pays interest at a fixed rate of 4.5 percent, according to sources. The loan-to-value ratio was 60 percent — established over a 1.25x debt service coverage ratio — indicating that the asset’s value is approximately $49 million.
This commercial real estate loan should cause policymakers to rethink the tax exemption of large credit unions.
Read more.
The 10-year, non-recourse debt pays interest at a fixed rate of 4.5 percent, according to sources. The loan-to-value ratio was 60 percent — established over a 1.25x debt service coverage ratio — indicating that the asset’s value is approximately $49 million.
This commercial real estate loan should cause policymakers to rethink the tax exemption of large credit unions.
Read more.
Monday, February 19, 2018
Technology CU Provides a $23 Million Construction Loan
Technology Credit Union (San Jose, CA) will provide a $23 million construction loan to W.L. Butler, Inc.
The loan will finance the development of a 60-unit apartment building overlooking Central Park in San Mateo.
Read the press release.
The loan will finance the development of a 60-unit apartment building overlooking Central Park in San Mateo.
Read the press release.
Wednesday, December 7, 2016
Will Examiners Second Guess Unguaranteed Business Loans?
Will the National Credit Union Administration (NCUA) examiners second guess credit union business loans that don't have personal guarantees?
In May 2016, NCUA replaced the explicit requirement of personal guarantees on business loans with an implicit expectation that credit unions should obtain a personal guarantee.
According to its updated Examiner's Guide, "[a] credit union should only waive a requirement for a personal guarantee when the credit union has a rigorous credit risk management program in place and the ability to properly mitigate the additional risk. The reliance on a personal guarantee should not be relinquished solely to meet competitive pressure."
NCUA expects that only financially strong borrowers would be eligible to receive a personal guarantee waiver.
NCUA lists multiple factors that should be used to determine if a borrower is financially strong, including superior debt service coverage, positive income and profit trends, a strong balance sheet with a conservative debt-to-worth ratio, readily salable collateral supporting the loan, and a low loan-to-value ratio for the loan.
In addition, credit unions must set concentration limits in their policies on the maximum amount of business or commercial loans that do not have personal guarantees.
Moreover, NCUA expects a credit union to "monitor a borrower's financial condition by requiring frequent financial reporting and compliance with specific well-defined financial covenants. The borrower’s operation should be monitored by frequent contacts by the credit union with the borrower to evaluate if there have been material changes to the operations."
In closing, the Examiner's Guide states that "[e]xaminers should determine whether a credit union adheres to its policy in granting unguaranteed commercial loans. Examiners should give particular attention to the credit union’s ability to monitor the performance of these loans. Loans without the benefit of a personal guarantee should be reported to the board in the aggregate and clearly monitored for adverse changes in their repayment performance or overall risk."
Unfortunately, too much of the guidance is based upon subjective language, which will give credit union examiners a lot of leeway to second guess business loans without personal guarantees.
Read the section on personal guarantees.
In May 2016, NCUA replaced the explicit requirement of personal guarantees on business loans with an implicit expectation that credit unions should obtain a personal guarantee.
According to its updated Examiner's Guide, "[a] credit union should only waive a requirement for a personal guarantee when the credit union has a rigorous credit risk management program in place and the ability to properly mitigate the additional risk. The reliance on a personal guarantee should not be relinquished solely to meet competitive pressure."
NCUA expects that only financially strong borrowers would be eligible to receive a personal guarantee waiver.
NCUA lists multiple factors that should be used to determine if a borrower is financially strong, including superior debt service coverage, positive income and profit trends, a strong balance sheet with a conservative debt-to-worth ratio, readily salable collateral supporting the loan, and a low loan-to-value ratio for the loan.
In addition, credit unions must set concentration limits in their policies on the maximum amount of business or commercial loans that do not have personal guarantees.
Moreover, NCUA expects a credit union to "monitor a borrower's financial condition by requiring frequent financial reporting and compliance with specific well-defined financial covenants. The borrower’s operation should be monitored by frequent contacts by the credit union with the borrower to evaluate if there have been material changes to the operations."
In closing, the Examiner's Guide states that "[e]xaminers should determine whether a credit union adheres to its policy in granting unguaranteed commercial loans. Examiners should give particular attention to the credit union’s ability to monitor the performance of these loans. Loans without the benefit of a personal guarantee should be reported to the board in the aggregate and clearly monitored for adverse changes in their repayment performance or overall risk."
Unfortunately, too much of the guidance is based upon subjective language, which will give credit union examiners a lot of leeway to second guess business loans without personal guarantees.
Read the section on personal guarantees.
Wednesday, April 13, 2016
CUSOs Fuel Michigan CUs Business Lending Growth
Credit union service organizations (CUSOs) have played a key role in growing business lending at Michigan's credit unions, according to an article in Crain's Detroit Business.
The article notes that Ann Arbor-based Michigan Business Alliance (MBA), which is a CUSO, does underwriting and portfolio management on behalf of some 36 credit unions around the state. MBA started modestly, with a loan portfolio of $3.2 million at the end of 2004, and grew that to $423 million at the end of 2014 and $460 million at the end of last year. MBA stated that its commercial lending sweet spot are loans of $50,000 to $5 million.
Another CUSO, Troy-based Commercial Alliance LLC, has booked commercial loans of $46.3 million in 2011 and serviced a portfolio of $179.7 million. In 2015, it booked commercial loans of $156 million and serviced a portfolio of $388.7 million for 135 credit unions in the state. The CUSO has booked $39 million in loans with two weeks left in the first quarter.
The growth of commercial lending at CUSOs is a potential vulnerability for the credit union industry as the National Credit Union Administration does not have the power to examine third party service providers.
Read the story.
The article notes that Ann Arbor-based Michigan Business Alliance (MBA), which is a CUSO, does underwriting and portfolio management on behalf of some 36 credit unions around the state. MBA started modestly, with a loan portfolio of $3.2 million at the end of 2004, and grew that to $423 million at the end of 2014 and $460 million at the end of last year. MBA stated that its commercial lending sweet spot are loans of $50,000 to $5 million.
Another CUSO, Troy-based Commercial Alliance LLC, has booked commercial loans of $46.3 million in 2011 and serviced a portfolio of $179.7 million. In 2015, it booked commercial loans of $156 million and serviced a portfolio of $388.7 million for 135 credit unions in the state. The CUSO has booked $39 million in loans with two weeks left in the first quarter.
The growth of commercial lending at CUSOs is a potential vulnerability for the credit union industry as the National Credit Union Administration does not have the power to examine third party service providers.
Read the story.
Friday, March 18, 2016
Technology CU Finances $22.4 Million SBA 504 Loan
Technology Credit Union (San Jose, CA) announced on March 17 that the credit union has funded its largest Small Business Administration (SBA) 504 loan to date at $22.4 million.
The loan provided financing to assist a commercial tenant’s purchase of a 112,000 square-foot, multi-tenant office building located in Burlingame, California.
According to the press release, the $2 billion credit union has originated over $300 million in commercial loan commitments to more than 120 middle market businesses.
Read the press release.
The loan provided financing to assist a commercial tenant’s purchase of a 112,000 square-foot, multi-tenant office building located in Burlingame, California.
According to the press release, the $2 billion credit union has originated over $300 million in commercial loan commitments to more than 120 middle market businesses.
Read the press release.
Thursday, July 16, 2015
Personal Guarantees and MBLs
The National Credit Union Administration (NCUA) Board is proposing to eliminate from its Member Business Loan (MBL)regulations the requirement that a credit union obtain a personal guarantee when originating a business loan.
This comes five years after the NCUA Board rescinded an exemption for RegFlex credit unions from obtaining personal guarantees when making a MBL. In 2010, NCUA wrote that obtaining the principals’ personal guarantee is a prudent underwriting practice that greatly enhances the likelihood of loan repayment and should be required of all credit unions. A credit union that fails to do so subjects itself to increased risk.
According to the proposed rule, the NCUA Board continues to believe having the principals of the borrower commit their personal liability to the repayment of the obligation is very important for commercial lending and is a form of credit enhancement.
NCUA expects loans without personal guarantees may only be done with appropriate underwriting and portfolio safeguard. For example, a credit union should set limits for MBLs without personal guarantees as a percentage of a credit union's net worth.
Also, the NCUA Board expects a credit union to track commercial loans without personal guarantees and report on these loans to senior management and the credit union board.
I suspect that credit unions will wave the use of personal guarantees for the best commercial borrowers.
But I also believe that NCUA will probably revisit the issue of personal guarantees on MBLs the next time there is a downturn in the credit cycle.
This comes five years after the NCUA Board rescinded an exemption for RegFlex credit unions from obtaining personal guarantees when making a MBL. In 2010, NCUA wrote that obtaining the principals’ personal guarantee is a prudent underwriting practice that greatly enhances the likelihood of loan repayment and should be required of all credit unions. A credit union that fails to do so subjects itself to increased risk.
According to the proposed rule, the NCUA Board continues to believe having the principals of the borrower commit their personal liability to the repayment of the obligation is very important for commercial lending and is a form of credit enhancement.
NCUA expects loans without personal guarantees may only be done with appropriate underwriting and portfolio safeguard. For example, a credit union should set limits for MBLs without personal guarantees as a percentage of a credit union's net worth.
Also, the NCUA Board expects a credit union to track commercial loans without personal guarantees and report on these loans to senior management and the credit union board.
I suspect that credit unions will wave the use of personal guarantees for the best commercial borrowers.
But I also believe that NCUA will probably revisit the issue of personal guarantees on MBLs the next time there is a downturn in the credit cycle.
Friday, May 22, 2015
Technology CU to Launch Asset-Based Business Lending Program
San Jose, California-based Technology Credit Union announced that it will now provide asset-based loans, including accounts receivable and inventory financing. The credit union will provide small- and mid-size companies revolving credit facilities between $100,000 and $5 million, to be used for debt refinancing and equipment purchases, as well as to supplement working capital.
Read more.
Read more.
Monday, October 6, 2014
Security Service Advertising Large Commercial Loans
Security Service Federal Credit Union (San Antonio, TX) ran an ad in the September 28th Caller Times promoting commercial loans from $5 million to $50 million.
Business loans ranging in size from $5 million to $50 million are not small business loans.
Is the credit union tax exemption meant to subsidize multi-million dollar commercial loans?
Business loans ranging in size from $5 million to $50 million are not small business loans.
Is the credit union tax exemption meant to subsidize multi-million dollar commercial loans?
Monday, April 15, 2013
CUNA's Whacky Idea
During a hearing on April 10, CUNA floated in its testimony a proposal to raise the de minimus threshold for a business loan to $500,000 and to index it to inflation going forward.
Currently, the de minimus threshold is $50,000. That means the total of all such extensions of credit to a borrower or an associated member less than $50,000 does not count against the member business loan cap of 12.25 percent of assets.
An increase in the de minimus threshold from $50,000 to $500,000 would represent a substantial expansion in the credit union business lending authority. This would significantly free up credit unions to make large commercial loans; because loans under $500,000 would no longer count against the cap. This would further move credit unions away from their mission of meeting the credit needs of consumers, especially those of modest means.
Moreover, raising the threshold would pose a significant safety and soundness risk to the National Credit Union Share Insurance Fund (NCUSIF). These loans would no longer be subject to the National Credit Union Administration's Member Business Loan regulation, because they would no longer be defined as member business loans.
While most people would agree that business loans under $50,000 don't pose a material risk to the NCUSIF, the same cannot be said for loans of $500,000.
Rather than raising the threshold, Congress should eliminate the de minimus member business loan threshold. All business loans made by credit unions should count against the member business loan cap.
Currently, the de minimus threshold is $50,000. That means the total of all such extensions of credit to a borrower or an associated member less than $50,000 does not count against the member business loan cap of 12.25 percent of assets.
An increase in the de minimus threshold from $50,000 to $500,000 would represent a substantial expansion in the credit union business lending authority. This would significantly free up credit unions to make large commercial loans; because loans under $500,000 would no longer count against the cap. This would further move credit unions away from their mission of meeting the credit needs of consumers, especially those of modest means.
Moreover, raising the threshold would pose a significant safety and soundness risk to the National Credit Union Share Insurance Fund (NCUSIF). These loans would no longer be subject to the National Credit Union Administration's Member Business Loan regulation, because they would no longer be defined as member business loans.
While most people would agree that business loans under $50,000 don't pose a material risk to the NCUSIF, the same cannot be said for loans of $500,000.
Rather than raising the threshold, Congress should eliminate the de minimus member business loan threshold. All business loans made by credit unions should count against the member business loan cap.
Tuesday, January 5, 2010
Commercial Lending Undid HeritageWest
More details are coming out about the failure of HeritageWest FCU in Utah.
Ronald L. Burniske, president and CEO of Virginia Beach-based Chartway FCU, which acquired HeritageWest FCU, told the Virginian-Pilot that HeritageWest's difficulties arose from a loss of focus on consumer lending and its move into lending to commercial builders.
In a separate interview with Credit Union Times, Burniske pointed out that "any number of CUs, unlike banking counterparts, lack internal expertise to handle large scale real estate or commercial development endeavors, factors that undid the $311 million HeritageWest FCU."
Ronald L. Burniske, president and CEO of Virginia Beach-based Chartway FCU, which acquired HeritageWest FCU, told the Virginian-Pilot that HeritageWest's difficulties arose from a loss of focus on consumer lending and its move into lending to commercial builders.
In a separate interview with Credit Union Times, Burniske pointed out that "any number of CUs, unlike banking counterparts, lack internal expertise to handle large scale real estate or commercial development endeavors, factors that undid the $311 million HeritageWest FCU."
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