Why Growth Beyond Commercial Real Estate Is Essential to Serving Members

April 15, 2026

By Kate Randazzo, Abrigo

The gap in commercial lending: Limited participation, concentrated volume

Credit unions have long relied on commercial real estate (CRE) lending as a cornerstone of their commercial portfolios. It’s familiar, collateral-backed, and often viewed as a lower-risk entry point into business lending. But that comfort can also limit how broadly institutions expand their commercial programs.

As a result, commercial lending remains underpenetrated across credit unions overall, with most growth concentrated among a small subset of institutions. In a recent Abrigo webinar, Omar Shute shared the following statistics to illustrate the significant opportunity for credit unions to expand—especially those looking to stay competitive as industry consolidation continues.

• 75% of credit unions do not do any commercial lending, meaning only about 25% are active in the space.
• Of those that do lend commercially, just 10% of credit unions originate 90% of all commercial loans, showing how concentrated activity is among a small group.
• The number of credit unions has declined significantly—from ~24,000 in 1970 to about 4,300 today, with projections dropping further to 2,800–3,300 in the next decade due to consolidation.

Those credit unions that want to survive will need to explore the realm of commercial lending beyond CRE.

Credit unions’ reliance on CRE: Comfortable, but limiting

There are clear reasons why CRE dominates many portfolios. These loans are tangible, relatively straightforward to underwrite, and align well with the risk frameworks many institutions already understand. For teams transitioning from consumer lending, they offer a natural starting point.

Because of this, CRE has become what Shute calls the “sweet spot” for many institutions entering commercial lending. But what makes it accessible also makes it limiting.

“The drawback is that they are more transactional in nature,” he said. “Your borrowers are going to be very, very sensitive to interest rates, and they will drop you for another lender for ten basis points better rate.”

In the CRE space, even strong relationships can be disrupted by small pricing differences. At the same time, shifting market conditions (rising rates, tighter underwriting, and changes in property demand) are adding new layers of complexity and concentration risk. The result is a portfolio that may grow in size, but not necessarily in strength. And for many institutions, growth slows not because of market conditions or regulatory limits, but because their commercial lending programs were never designed to scale efficiently.

Transactional relationships and operational drag

The biggest challenge with a CRE-heavy strategy is not the asset class itself but those transactional relationships. Too often, Shute says, credit unions book large real estate loans but fail to capture the customer in other areas. Borrowers may finance properties with the credit union while maintaining operating accounts, treasury services, and day-to-day financial activity elsewhere. This disconnect leaves significant value on the table.

In addition, lean teams, manual processes, and concerns about risk oversight make it difficult to increase volume without adding complexity. In many cases, credit unions hesitate to expand not because they lack opportunity, but because scaling feels operationally out of reach. Without the right commercial lending infrastructure, growth becomes difficult to sustain. Institutions find themselves balancing loan demand with internal capacity, rather than building a program designed for consistent, repeatable expansion.

Where growth happens

To move beyond transactional lending, credit unions are looking at commercial and industrial (C&I) lending and business lines of credit as the next step. Unlike CRE, these products are tied directly to a business’s operations—how it generates revenue, manages expenses, and navigates day-to-day cash flow. That connection naturally opens the door to broader engagement. When a credit union supports a business’s working capital needs, it is far more likely to capture operating accounts, treasury services, and payment activity. It also creates opportunities to serve employees, expand membership, and build relationships that extend well beyond a single loan.

Equally important, these lending segments can be structured to be efficient and scalable. By prioritizing the right mix of loan types, member segments, and operating models, credit unions can grow their portfolios in ways that align with both member needs and internal capacity.

Cash flow, not just collateral

One of the main reasons credit unions hesitate to expand beyond CRE is risk perception. Real estate offers something tangible—a physical asset that can be appraised, monitored, and, if necessary, liquidated.

But in practice, said Shute, commercial loans are repaid through cash flow, not collateral. A business with strong, consistent cash flow, healthy debt service coverage, and an active deposit relationship can present a more stable repayment profile than a marginal CRE deal supported primarily by property value. Shifting the focus from collateral to cash flow allows credit unions to evaluate risk more holistically and identify opportunities that may otherwise be overlooked.

Just as importantly, aligning credit policy, governance, and risk management frameworks to support these types of loans is key to scaling safely. Growth doesn’t require loosening standards—it requires designing processes that make disciplined lending repeatable.

Start small and scale strategically

Expanding beyond CRE does not require a complete overhaul of the lending program. In fact, the most successful institutions focus on building scalable foundations rather than simply adding volume. That might include introducing targeted business lines of credit, standardizing underwriting approaches, or leveraging partners to supplement internal expertise. Technology also plays a critical role by streamlining workflows, improving consistency, and reducing manual effort. These steps help credit unions increase lending volume and consistency while still meeting board and examiner expectations. More importantly, they enable growth without materially increasing headcount or fixed costs—an essential consideration for institutions operating with small teams. CRE will continue to play an important role in commercial lending portfolios, but credit unions that combine CRE with C&I lending, treasury services, and deposit strategies are better positioned to compete effectively and deliver greater value to their members.

For more information about how Abrigo can help your credit union manage risk and drive growth with their management solutions for compliance, credit risk, lending, and asset/liability, contact the GoWest Solutions team today.

Posted in GoWest Solutions, Top Headlines.