Q&A: How Credit Unions Can Strategically Expand into Commercial Lending

Credit unions of all sizes are looking for ways to better serve their members, build long-term relationships, and stay competitive. Commercial lending is gaining traction as a strategic pathway to achieve these operational goals. In this Q&A feature, we speak with Patrick Gullatt, President & CEO of Barksdale Federal Credit Union (‘Barksdale FCU’ – $2.4 billion in assets), Migual Patterson, President & CEO of Lampco Federal Credit Union (‘Lampco FCU’ – $80 million in assets), and Richard Guillot, President & CEO of Business Alliance Financial Services (‘BAFS’), to discuss why commercial lending matters, keys to cultivating a successful program, and how credit unions of varying asset sizes can approach this emerging growth opportunity.

Q: Patrick, let’s start with you. Barksdale has been offering commercial lending for quite a while now. What made your credit union decide to launch the program?

Gullatt (Barksdale FCU): We began commercial lending in 2009 when we had $900 million in assets. Our commercial portfolio was $800,000 at that time, but we saw an opportunity to better serve our community and attract new members by offering small business loans. Since then, we have grown our commercial portfolio to $63.4 million and have increased assets to approximately $2.4 billion.

Q: Migual, hearing Patrick talk about growth at a larger institution, what was the motivation for Lampco, at a much smaller size, to take this step?

Patterson (Lampco FCU): Given our market and current size of $80 million in assets, we recognized that commercial lending was imperative to continue engaging our small business members. Without it, we risked losing them to larger banks. These services have been critical to keeping our members invested with us across all of their financial needs, especially as a smaller institution.

Q: Neither of you started with a full in-house department. How did you structure the support you needed in those early days?

Patterson (Lampco FCU): We are good at relationship-building, but we did not have the internal back-office expertise. We partnered with BAFS for full workflow support, from loan origination to servicing and portfolio management. They provided the comprehensive technology to make the program possible and capable of scaling long-term.

Gullatt (Barksdale FCU): It was the same case for our credit union; we outsourced everything to BAFS at first. Over time, we have internalized functions for smaller, straightforward credit requests, but we continue to leverage BAFS’ platform and expertise for larger, more complex deals. This flexibility has been key to responsibly managing our growth.

Q: Ricky, both Patrick and Migual emphasized the value of partnering with BAFS. From your side, why is it so important for credit unions to have commercial lending in their offerings?

Guillot (BAFS): Commercial lending is vital for credit unions to remain competitive and build stickier member relationships. Based on my team’s combined decades of experience, it serves as a real gateway to building long-term member engagement. Credit unions that can meet a business owner’s lending needs naturally open the door for multiple cross-selling opportunities in deposits, consumer lending, and other services. Taking this holistic approach to business development not only drives growth but also enhances member satisfaction and loyalty.

Q: And what has that meant in practice for both Barksdale and Lampco – what results have you seen?

Gullatt (Barksdale FCU): Our commercial portfolio has grown significantly over a 15-year period, and we have maintained a conservative but consistent approach that has led to steady, sustainable growth. As we have expanded within the commercial lending landscape, having the flexibility to leverage BAFS when needed has been invaluable. The partnership allows us to scale our program without taking on the fixed costs typically associated with a fully internalized operation.

Patterson (Lampco FCU): Partnering with BAFS has allowed us to enter the commercial lending space at a fraction of the cost it would take to independently manage the program. We can grow at our own pace without the burden of fixed costs, while also unlocking additional business opportunities in consumer lending and deposits. By moving intentionally in measured steps, we focus on meeting our members’ immediate needs while staying aligned with our team’s capabilities.

Q: Can you share an example of when that flexibility made a difference for a member?

Patterson (Lampco FCU): A long-time member needed interim funding on a project with a tight timeline. We submitted the request to BAFS and had an initial response within 24 hours. The underwriting was completed in just three days, allowing the member to keep their project on track without delay. BAFS provides the back-office support, technology, and expertise to respond with speed and accuracy, allowing our team to build stronger relationships and deliver on commercial lending without overextending our team.

Gullatt (Barksdale FCU): We have had similar cases where members needed to close quickly due to circumstances beyond their control. BAFS has been instrumental in helping us handle these requests efficiently, and that ability to maintain high responsiveness has been a key ingredient to our growth.

Q: Richard, you’re hearing these success stories. Where do you see the biggest opportunities for credit unions looking to expand in this space? How is the evolving regulatory landscape influencing how credit unions approach commercial lending?

Guillot (BAFS): Technology innovation is the biggest opportunity in commercial lending right now. Credit unions need commercial lending platforms that support the lending process end-to-end, while incorporating automation tools like OCR, document recognition, and “measured” AI capabilities. Each credit union has different needs depending on size, and these platforms must be configurable to meet each institution’s unique structure.

Additionally, the regulatory environment is pushing for stronger stress testing and proactive risk rate modeling, leading to more credit unions taking a more conservative approach to growth. As a result, partnering with third-party vendors that provide technology for loan origination, analytics, and credit monitoring is more common. Strengthening risk frameworks and focusing on proactive risk mitigation will continue to be a critical part of commercial lending strategy.

Q: What advice would you give a credit union leader about offering commercial lending?

Gullatt (Barksdale FCU): Every credit union has opportunities in the commercial lending market. Newer programs may require more guidance than those with established experience, so it is essential to partner with experts who can be flexible with your organization. Equally important is having relationship managers who can bridge communication with both existing and prospective borrowers, while also coordinating with any third-party resources.

Patterson (Lampco FCU): For other credit unions of similar size, especially those with little to no existing commercial loans, I would recommend seeking guidance and support from a third-party partner to assist with designing and implementing a commercial loan program, rather than launching alone. Starting a commercial loan program, even on a smaller scale, can be an effective way to strengthen member relationships and grow your business, without taking unnecessary risk.