Small Business Loans Set Pacoima Credit Union Apart

Small business lending landed the Pacoima Development Federal Credit Union on a national list of the fastest growing credit unions over a five year period. The east San Fernando Valley-based institution grew 88 percent in loans made between September 2006 and September 2011, according to the Credit Union National Association (CUNA). That growth rate put it at No. 3 out of 10 credit unions on the CUNA list compiled by the group’s economics and statistics department. It was surpassed by Hoosier Hills Credit Union in Bedford, Ind., and Choices Federal Credit Union in St. Louis, the No. 1 and No. 2 credit unions, respectively. Founded in 2005, the credit union remains in an aggressive growth stage and likely will be for the next three or four years, said manager Antonio Pizano. SBA lending made Pacoima stand out among other credit unions. Most don’t participate in the U.S. Small Business Administration program because of stringent financial requirements and the expertise needed. “We do not fall short of applicants,” Pizano said. The Pacoima credit union has $4.1 million in assets and makes small business loans in amounts between $50,000 and $400,000. The average loan amount is $150,000. Since its founding, the institution has lent $1.8 million through 16 small business loans, or about 70 percent of its loan portfolio amount, Pizano said. The credit union also makes consumer and home equity loans. The businesses that are most requesting the loans are retail, manufacturing, and professional services, including law and accounting firms, Pizano said. Year Founded: 2005 Manager: Antonio Pizano Assets: $4.1 million Small Business Loans 2005 – 2011: 16 loans, totaling $1.8 million Consumer Loans: 57 loans totaling $500,000 Home Equity Loans: 4 loans totaling $400,000 The credit union has been able to stake out a niche in SBA lending because the national bank chains with branches in the area remain strict with their lending criteria and regional or community banks are non-existent in Pacoima, Pizano said. Pacoima Development has made 11 small business loans on the books totaling $1.2 million and would like to do more but is limited by federal regulations. Credit unions are allowed to use only 12.5 percent of their assets for SBA lending, a regulation that has kept many from participating. Federal legislation, however, is pending that would increase that amount to 25 percent. Roberto Barragan, president of the Valley Economic Development Center, a nonprofit lender that sponsors the Pacoima credit union said even the 25 percent threshold is too low. “We should be allowing credit unions to do more loans and SBA is a great way to do it by limiting the risk with a federal guarantee,” Barragan said. There are other factors, however, that prevent credit unions from participating more fully in SBA lending. SBA lending comes with a great deal of complication and a time commitment that needs to be weighed, said Pat O’Keefe, vice president of communications for CUNA. Credit unions such as Pacoima Development that hang in there and meet the demand from members can find a good business, O’Keefe said. “That is what credit unions do, they cater their services to what the members want rather than what the institution wants to give them,” O’Keefe said. Membership at Pacoima Development has stagnated at about 850 members, but Pizano has plans to bring in more consumer accounts. His goal is to have 1,300 to 1,400 members by the end of this year. The credit union offers a home equity product and a payday loan service offering lower rates than customers will find at check cashing stores, Pizano said. The newest product will be a checking account service to appeal to individuals and businesses. Pizano said one way he intends to grow membership is to offer checking account services to employees of the small businesses the credit union lends to. “When we create that relationship, it is a loyal relationship we get from those individuals,” Pizano added. Once the credit union has a new member, it can offer other services, such as car loans and savings accounts, even if that member already has an account with a large bank. “The credit unions always want their members to think of them first,” O’Keefe said.