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Large CU helps smaller one offer microenterprise loans
ST. LOUIS (1/30/12)--A partnership between two St. Louis-based credit unions--one large, one small--means the smaller one now can officer microenterprise loans.

A local foundation had asked Choices FCU, which has less than $400,000 in assets, if it could offer microenterprise loans.  The credit union was interested, but its staff struggled to structure a product that would be large enough in scale while acceptable to regulators, said a press release from the Missouri Credit Union Association (MCUA).

The solution emerged when leaders from Choices met with leaders of  long-term industry mentor St. Louis Community CU, a $207 million asset credit union. They developed a program that would introduce a microenterprise product to Choices Federal's borrowers, with St. Louis Community agreeing to purchase a 90% participation in each loan closed under the program.

Choices Federal also received a $15,000 grant from the foundation that initially approached the credit union about offering the loans.  The grant allows Choices Federal to close up to $100,000 in microenterprise loans, which will be targeted at $35,000 or less.

"These loans will assist aspiring entrepreneurs and small business owners to finance the start-up or expansion of their businesses," said Phil Minden, senior business manager at Choices FCU. He noted that the small loan sizes "will target a segment of the market that is largely underserved by traditional financial institutions."

The partnership also will "bring more resources to the small business community," said Mike O'Brien, St. Louis Community senior vice president and chief marketing officer. "Most financial institutions don't want to offer micro loans, but it's a natural for both of our credit unions.  Working together makes a lot of sense--practically and philosophically."

The joint structure means Choices Federal can offer members a new product while mitigating potential risks. It plans to offer the loans for the next two years and expand its portfolio to $250,000, before moving forward independently.

"The collaboration is an excellent example of how larger, more established credit unions can work with small, emerging  credit unions to expand their product base and grow their balance sheet," Minden concluded.


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