A Surprising Source of CRE Capital: Credit Unions

In a fast-changing business environment, commercial real estate lenders don’t always act as expected, so it’s necessary to have a longer list of capital provider choices on-hand. One that may not be top of mind is credit unions—but Paul LeTourneau, Chicago-based manager of commercial loan originations at Alliant Credit Union, sees numerous advantages in this option. In this Q&A, he provides insights into how borrowing requirements and credit unions can work well together.

Q: While interest rates are currently low, there’s a lot of factors clouding the market outlook, including trade tensions and policy uncertainty. What should CRE borrowers keep in mind as they seek financing in this environment of uncertainty?

A: One thing’s for sure: uncertainty is always certain. And in times when there is more volatility than normal, savvy commercial real estate borrowers look beyond the obvious deal partners with whom they have traditionally worked. It’s important to explore all avenues and not overlook financing from a capital provider that can provide tailored structures, such as a credit union. And while interest rates may be lower through some institutions, there’s a chance they may not include the best terms. Deal structure and flexibility should be major considerations when seeking financing options during uncertain times.

Q: Credit unions are sometimes overlooked as a capital source for CRE deals. What should borrowers know about how credit unions differ from traditional lenders?

A: Unlike traditional lenders, credit unions operate solely to serve their members by providing attractive yields on depository accounts and offering lower interest rates on loans and mortgages, including commercial loans. Each type of credit union operates differently – some serve niche markets and employers, while others target a diverse membership base on a national level or in a local community. They always keep long-term needs of members at the forefront, which ultimately shapes the lens through which they evaluate a lending proposal. A national credit union can often be more flexible and is not restricted to a region or local footprint, as some people in the market assume.

Q: What type of deals are likely to be a good fit for credit union financing?

A: Credit union financing is an option for just about any type of property – from multifamily, industrial and retail centers, to student housing, mobile home communities and self-storage. In particular, commercial real estate borrowers who need flexibility may find credit union loans to be a good fit. By offering tailor-made yield maintenance and structuring such as interest-only, short-term bridge, flexible yield maintenance fees, longer-term fixed rates or bridge-to-permanent capital, credit unions are great for a borrower facing uncertainties. And, these institutions are often more receptive to discussing additional capital requirements, future earn-outs or unique challenges the sponsor may be facing.

For comments, questions or concerns, please contact Paul Bubny