Business Deposit - Business Owner

Connecting with Business Members through Deposits

From Larry Middleman, CUBG President/CEO

When CUBG conducted a focus group with business owners near the top of the small business pyramid, the responses reinforced a long-held truism:

Not every business needs to borrow money, but every business needs a strong depository relationship.

The business account opportunity is one that is frequently overlooked by credit unions in favor of a focus on business loans, particularly CRE lending. In order for your credit union to move up the pyramid and capture a larger piece of the small business market pie, you must first shore up the product line to fit the needs of more sophisticated small businesses.

For example, according to a 2013 study by Raddon Financial Group, the majority of businesses with over $5 million in annual sales utilize services like a money market account and merchant services. Other popular services include: remote deposit capture, ACH origination, commercial insurance, and sweep accounts for cash management purposes.

To drill down further, basic consumer-type depository services that most credit unions offer to micro-businesses, such as a business checking account, a savings account, consumer online banking and bill pay platforms, and perhaps merchant Visa/Mastercard services, are not sufficient to be a player with more sophisticated businesses – those that keep six-figure deposit balances and generate significant fee income.

In order to reach this market, your credit union needs to offer a “next level” business deposits package, one that includes services such as: analyzed business checking, advanced-feature business online banking, remote deposit capture, and ACH origination capabilities. Online banking typically serves as the core, central point for businesses to manage the cash inflows and outflows of their accounts.

Do not underestimate the expertise needed to position your credit union as a knowledgeable resource in depository services. You will need to hire a dedicated expert well-versed in the needs of sophisticated small businesses, with a full understanding of the benefits and features of these specialized services. In other words, you will need to hire a Cash Management Officer.

Most credit unions intent on growing a strong and vibrant business loan portfolio will hire three to five commercial lending experts. Yet these same organizations won’t hire anyone to manage the deposit side of the equation. This is not a formula for long-term success.

By the way, did you know that maintaining your business borrower’s deposit accounts may be the best risk management tool that you have at your disposal? Instead of waiting to receive quarterly financial statements or worse yet – annual tax returns – before analyzing your member’s business conditions and ongoing performance, access to the member’s deposits will allow you to observe changes in cash flow in real time, providing you the tools to address issues quickly, before they become real headaches for you and your member.

The future could not be brighter for credit unions in the business lending marketplace. With recent, positive regulatory changes, credit unions’ outstanding reputation for trust and service, and an improving economic outlook, now is the time to take full advantage of this exciting opportunity. With some planning and a dedicated focus on serving business members’ specialized needs, credit unions can capture the full business relationship and become valued partners with larger, more sophisticated, and profitable member businesses.

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