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Lending & Credit Risk Commercial Lending Lending Regulation Loan Origination System Member Business Lending Risk Ratings SBA Lending Small Business Lending

How to increase member business lending

Kate Randazzo
January 14, 2026
0 min read

Lending strategy for credit unions 

Member business lending is growing again at credit unions, driven by improved liquidity and renewed demand from small businesses. But as portfolios expand and average loan sizes increase, rising delinquencies signal that risk management must keep pace with origination. In 2026, successful member business lending will depend on disciplined portfolio oversight, strategic partnerships, and a long-term view of member needs.

This article covers these key topics: 

The state of credit union business lending

Member business lending has long played a critical role in how credit unions support small businesses and local communities. However, credit union member business lending has historically been constrained by regulation, most notably the lending caps established under the 1998 Credit Union Membership Access Act and related NCUA rules. These limits have shaped the scale, structure, and growth strategies of member business lending programs for decades.

Despite these constraints, demand for member business lending has remained consistent. According to the Federal Reserve’s Small Business Credit Survey, approximately 7% of small business credit applicants have sought loans, lines of credit, or cash advances from credit unions each year since 2019, demonstrating steady interest in credit union–based member business lending options.

More importantly, credit unions are competitive when they participate in member business lending. SBCS data shows that in 2023, credit union approval rates for business loans, lines of credit, and cash advances were comparable to small banks and traditional nonbank lenders, with 51% of applicants fully approved and 24% partially approved. The success factor lies in how member business lending programs are structured, staffed, and managed over time.

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Speed and risk management are pain points to successful SMB loans

The MBL cap limits the amount of business loans a credit union can make, but for some credit unions, the restriction has also become a barrier to entry. Due to this cap, some credit unions are hesitant to invest time and resources in establishing small business loan programs.

To be successful in business lending, it’s essential for credit unions to focus on areas where they have control: processes. Digitizing and automating the business lending process allows for credit unions to drastically improve time- and cost-savings. From online loan applications to automated loan decisioning, today’s technology enables credit unions to make lending decisions quickly and support greater loan volumes.

If all loans require the same amount of time – regardless of size – your credit union has little incentive to make small-business loans. For some credit unions, a $20,000 loan and a $2,000,000 loan may go through largely the same origination process, resulting in the cost to originate the loan outweighing the benefit. Technology enables credit unions to streamline their lending process by electronically processing tax returns, reducing and eliminating manual data entry, and automatically scoring and decisioning loans, among other benefits. Business loans can be some of the most paperwork-intensive loans offered, and these technologies enable credit unions to scale business loans, making them profitable investments for their members. 

Risk management's role

Smooth origination is only one part of successful member business lending. Managing a member business lending portfolio through economic cycles, interest rate changes, and borrower stress is significantly more complex.

During the late 2010s and early 2020s, many credit unions benefited from historically low interest rates and exceptionally low delinquencies across their member business lending portfolios. According to the NCUA, delinquency rates at federally insured credit unions reached multi-decade lows during this period.

That environment has shifted. In 2025, member business lending activity rebounded, but early signs of credit stress began to emerge. NCUA quarterly data show that while loan balances increased year over year, delinquency rates also rose, indicating a more normalized credit cycle. For credit unions, this means member business lending success now depends as much on monitoring, analytics, and new tools for proactive risk management as it does on origination volume.

Volumes are back

After a challenging period marked by liquidity pressure and muted demand, member business lending volumes increased in 2025. NCUA data shows that total loans outstanding at federally insured credit unions grew year over year in both the first and second quarters of 2025, reflecting a broad rebound in lending activity, including member business loans.

However, growth within member business lending has been uneven. Industry data suggests that loan dollar volume has grown faster than loan counts, indicating a shift toward larger average member business loan sizes—often tied to commercial real estate. This trend increases concentration risk within member business lending portfolios and reinforces the need for disciplined oversight.

SBA loans as a growth track

Credit unions that want to expand their business lending opportunities and support local businesses and entrepreneurs may consider participating in the Small Business Administration (SBA) loan program.

Loans guaranteed by the U.S. Small Business Administration provide incentives for institutions to lend money to businesses that might not otherwise qualify for term loans. These loans help to bolster local economies by providing capital to small businesses and entrepreneurs. But SBA loans aren’t a magic bullet for business lending. Many financial institutions shy away from SBA loans, due to their reputation of being onerous, complex, and expensive.

To mitigate some of the complexities involved with SBA lending, credit unions can leverage SBA lending technology to help customize and streamline the underwriting and decisioning process for SBA loan application, as well as integrate FRANdata technology, which transfers all franchisor data and eliminates hours of research into franchisees or gambling on the performance of the franchise.

Participations are up, but so are credit quality pressures

Loan participations have re-emerged as a strategic lever within member business lending. After slowing during the liquidity crunch of 2022–2023, participation activity increased alongside improved balance-sheet conditions.

NCUA call report data shows that loan participation balances rose in 2024 and continued to increase in 2025, signaling renewed cooperation among credit unions engaged in member business lending. Institutions without the staffing or infrastructure to originate member business loans at scale are increasingly using participations to meet portfolio goals while managing concentration and regulatory limits.

When used strategically, loan participations can help credit unions expand member business lending capacity, diversify risk, and maintain consistent production without overextending internal teams.

Credit quality trends also deserve close attention. NCUA data shows that the delinquency rate for federally insured credit unions increased year over year in 2025, reaching 0.91% in the second quarter. While still manageable, rising delinquency levels signal increasing stress within loan portfolios—including member business lending portfolios.

Effective member business lending management requires early detection and intervention. Monitoring borrower behavior, property tax performance, and collateral conditions—essentials of effective risk grading—remains essential. In some cases, managing stressed member business loans may require outside expertise, as workouts and collections demand a different skill set than origination.

The future of member business lending

Member business lending has consistently been one of the most impactful ways credit unions serve their communities. As portfolios grow larger and more complex, credit unions must invest in member business lending infrastructure with the same rigor applied to origination growth.

This includes staffing, technology, analytics, and partnerships that support long-term portfolio health. Demand is also evolving. Many businesses formed during the pandemic years are now maturing and seeking more sophisticated financial services—ranging from SBA loans to working capital lines of credit and treasury management.

The current environment offers credit unions a timely opportunity to reset their member business lending programs for sustainable success

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About the Author

Kate Randazzo

Content Marketing Manager
Kate Randazzo is a Content Marketing Manager at Abrigo, where she works with industry thought leaders to create digital content that helps financial institutions better serve their customers. Before joining Abrigo, Kate managed social media and produced articles for Campbell University’s quarterly magazine and other university content initiatives. She earned

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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