By Richard Guillot, CEO and President, Business Alliance Financial Services (BAFS)
Community banks once dominated small-business and commercial lending, but that dynamic is changing. As consolidation reshapes the banking landscape, small business owners are looking for local partners who understand their business and the communities they serve.
Credit unions are positioned to fill this need. They already have the trust, brand equity, and member relationships that business owners value. What is often missing is the awareness among leadership around how attainable and successful a commercial program can become.
Why Credit Unions Are Built for This
The same capabilities that drive credit unions’ strength in retail – relationship depth, disciplined underwriting, and local insight – form the foundation for effective commercial lending.
Credit unions have access to rich member data across checking, savings, and loan accounts to understand financial patterns. This visibility can reveal members who operate small businesses or manage rental properties. Many of these members borrow elsewhere simply because the credit union has not offered a business solution.
Credit unions also apply more nuanced judgment in underwriting. Rather than relying solely on credit scores, they evaluate employment stability, collateral strength, and payment history. The same approach fits small-business lending, where local reputation and cash-flow realities often provide a fuller financial picture than an algorithm. Finally, credit unions know their markets. Frontline staff and community ties provide firsthand awareness of who is expanding or investing locally. That deep intelligence helps identify lending opportunities early and strengthen relationships through timely support.
Rethinking the Barriers
Commercial lending once demanded large departments, specialized teams, and manual workflows that few credit unions could justify. Today, that landscape has changed. Shared service providers, digital lending platforms, and experienced partners now make it possible to enter the space without building an entire department.
The remaining obstacle is perception. Many credit union leaders still associate commercial lending with complexity, high risk, or a departure from their mission. Yet, data trends across the industry indicate the opposite. A recent McKinsey study projects financial institutions that fail to modernize could see global profit pools decline by 9 percent as AI tools help consumers move deposits toward higher yields. That same shift affects credit unions that rely heavily on retail income.
As consumer margins continue to tighten, commercial lending offers both balance and purpose. It diversifies income while deepening roots in the local economy, helping credit unions remain relevant, resilient, and mission-driven as member needs evolve.
Commercial Lending as Strategy, Not Experiment
When executed well, commercial lending brings balance to credit unions. These portfolios tend to be less rate-sensitive and provide steadier contributions to net interest margin. They create a foundation of recurring, predictable income that helps credit unions smooth out swings in consumer demand.
Equally important, commercial relationships pull credit unions deeper into the economic fabric of their communities. Every business financed represents not just a loan, but a network of employees, vendors, and local impact. That proximity reinforces reputation and member loyalty in ways that digital-only strategies cannot match.
Building with the Right Partners
Credit unions exploring commercial lending no longer face the structural barriers that once made it prohibitive. A maturing ecosystem of service providers now supports functions such as underwriting, compliance, and loan servicing, allowing institutions to expand without overhauling their operations.
This collaborative model of shared expertise and infrastructure allows credit unions to grow at a pace that fits their capacity and risk appetite. When approached strategically, these partnerships extend institutional reach while keeping the focus on what defines the cooperative mission: relationships, trust, and community impact.
The Opportunity Ahead
Commercial lending no longer requires the scale once reserved for large banks, creating a crucial opportunity for credit unions to successfully step into this space. Advances in technology, shared service models, and specialized partners are lowering the barriers to entry, positioning credit unions to diversify income, deepen community relationships, and strengthen long-term relevance.
Credit unions are built on trust, accessibility, and long-standing member relationships – embodying the qualities small-business owners value most in a financial partner. The challenge is not capacity, it is perception. Commercial lending is both a strategic and cultural opportunity. It allows credit unions to balance their portfolios, strengthen earnings, and stay true to their cooperative purpose. It turns local knowledge into economic participation, fostering business growth, preserving local jobs, and helping members thrive.
As market consolidation continues, those that hesitate may find that the future of local business lending has already moved on without them. Credit unions that act will define their place in a new era of relationship-driven finance.