Alliant Credit Union of Chicago's Member Business Loans grew 24%last year to reach $355.6 million by Dec. 31, accounting for 5.5%of Alliant's total loans. Alliant's growth outstripped the nationalgrowth rate of 15% in 2016, which NAFCU showed was the fastest since 2008.

Charles Krawitz, who joined Alliant as its vice president ofcommercial lending in January 2017, responded to questions aboutits MBL program, which typically makes business loans of $1 millionto $20 million on commercial properties across the United States.Alliant ($9.5 billion in assets, 345,193 members) is one of thenation's 10 largest credit unions.

What's the trend in member business lending from thepast year?

Our MBL loans fall into two primary categories: those made tocommercial real estate investors and those made to owner occupantsof commercial properties. Demand for both categories of loansremains extremely strong for several reasons relating to theeconomy's continued expansion.

For starters, improved bottom-line cash flow, in conjunctionwith low interest rates, has created a favorable environment forproperty owners to refinance existing loans and utilize excessproceeds to improve their property's appearance and market appeal.Alliant anticipates a continued uptick in loan demand as marketprognosticators warn of increasing interest rates and propertyowners seek to lock in today's historically favorable long termrates.

What qualities are shared among businesses receivingloans from Alliant? Why Alliant? Why not a commercialbank?

Alliant lends to experienced commercial real estate ownerswhether or not they're local to their properties. If they're notlocal, we require that they work with highly regarded local leasingagents or managers.

While we make five-, seven- and 10-year term loans on all assettypes and evaluate each opportunity based on its individual merits,we are particularly partial to loans that generate consistent,historical bottom line cash flow. Examples of this type ofpreferred loan include: multi-family, neighborhood retail centersand multi-tenanted industrial properties. We are also highlyreceptive to placing term loans on recently constructedself-storage opportunities in a lease-up phase.

We're always in the market. We're always interested in the rightloan opportunities, whether they're refinances or acquisitions.

This position contrasts to other lenders that will only lend tothose in a very tightly defined geography and who are inconsistentin their lending appetite. Another benefit of Alliant lending isour flexibility when it comes to our overall relationship to thosereceiving loans. We don't require borrowers establish a broaderbanking relationship with us. In short, we don't condition ourlending on a mandated depository relationship or require othertie-ins.

Do you have an example of a business that hasparticularly benefitted from an Alliant loan?

In terms of a business that particularly benefited from anAlliant loan, one immediately comes to mind. Late last year we madea loan to a small business operating in the outsourcing field. Thebusiness owner had outgrown her existing office space and wasseeking to acquire a new building that could accommodate hergrowing company's needs. Meanwhile, she was looking to offset costsby generating rental income from a portion of the new space.Alliant provided a long-term financing solution at an attractiveinterest rate that turned this business owner's needs intoreality.

What trends do you see happening in the commerciallending space?

While commercial real estate continues to prosper, we aresensitive to the fact that the recent post-recession cycle has seena robust run up in values, and that these values may be toppingout. In particular, we are paying greater attention to risks thatmay manifest themselves at loan maturity, with a particular focuson tenant lease expirations and rental rates as they compare to thebroader market.

It's also important to keep an eye on employment: It's theleading determinant of demand for space, be it for commercial,multifamily, or hospitality properties. While there are localizedfactors that clearly exert upward or downward pressures onemployment, overall labor participation rates are increasing andupward wage pressures seem to be manifest in a growing number oflocales. Inflation, running at close to 2% nationally, should helpbolster rents, and in turn, lend support to commercial real estatevaluations. We anticipate that any such gains will be offset by theimpact of raising interest rates which will cause capitalizationrates to also increase.