Credit Unions Wanted More Room to Move. Now Comes the Hard Part.

Key Takeaways from This Blog:

• Regulatory easing, especially around member business lending caps and recent deregulation efforts, has significantly expanded credit unions’ opportunities to grow in commercial lending.
• Commercial lending is fundamentally different from consumer lending, requiring specialized talent, technology, risk management, and cultural adaptation to succeed.
• Credit unions must align their commercial lending strategy with their capabilities and exercise strong discipline, as increased regulatory freedom still demands careful governance and risk awareness.

While credit unions were established with the employee/consumer in mind, shifting regulatory requirements over the last few decades have expanded their ability to offer business services, including commercial lending services.

While some regulatory changes in the nineties and early 2000’s began to encourage more commercial lending, things first started to gain momentum after the NCUA relaxed the member business lending (MBL) cap in the middle of the last decade.

According to S&P Capital IQ Pro the number of bank acquisitions announced by credit unions for the years from 2011-2017 totaled 15 compared to 98 announcements from 2018-2025.

A More Flexible Regulatory Climate

The advent of Trump’s Unleashing Prosperity Through Deregulation Executive Order, issued in January 2025, encouraged the NCUA to initiate subsequently its Major Deregulation Project, focused on eliminating or revising obsolete, duplicative, and overly burdensome regulations; as well as to reestablish regulations to serve as guidance rather than requirements.

All this regulatory flexibility has accelerated the conversations around commercial lending as a strategic priority in credit union boardrooms across the country; and it represents a material growth opportunity for credit unions but only if the institution has the people, technologies, policies, and risk muscle to move wisely.

The NCUA reminded its audience of this in its March deregulatory announcement, framing added flexibility around what is appropriate for a credit union’s size, complexity, and board risk tolerance.

That is a subtle point, but an important one.

The regulator may offer more room, but it is still the board’s job to know exactly how much room the institution can afford.

Commercial Lending Is a Different Business

Credit unions need to recognize that commercial lending is not just consumer lending with bigger balances and better coffee in the lobby.

It demands different employee skill sets, different underwriting and risk profiles, deeper cash-flow analysis, tighter concentration limits, and stronger policy governance simply to issue the credit.

It also requires different technologies, including core configurations and system integrations to maintain the credit.

Most importantly, it requires a shift in culture to accommodate traditional commercial lenders, whether acquiring a bank or just a commercial lender and his existing book.

The credit unions that expand successfully will be able to show why their business model, governance, and community impact justify the move.

Credit unions that want to offer commercial lending should first ask themselves what kind of commercial lending their value proposition and operating model support can.

The Strategy Has to Fit the Institution

The answer is found at the precarious four-way intersection of employee knowledge, culture, technology and business member composition.

The requirements of a credit union focused on owner-occupied real estate businesses is much different than a credit union chasing treasury relationships with local businesses, or one that is trying to scale C&I through participations.

Freedom Requires Discipline

Credit unions spent years asking for more freedom.

Now they have a chance to prove they can do something disciplined with it.

The institutions that win this moment will be the ones that pair new freedom with old-fashioned credit discipline, board clarity, and a very honest assessment of what kind of commercial lender they want to become.

Once they answer that question, the truly hard work can begin.