Where Sustainable Loan Growth Comes From

The full version of this article is published on The Credit Union Connection.

In Joe Brancucci’s The Lending You Do Not See, he begins with the story of Isaac, who started his day knowing he needed to purchase a car and ended it as a member of a credit union. He hadn’t set out to establish a new financial relationship. From his perspective, the relationship was with the dealership; the credit union membership was simply part of completing the transaction.

Credit unions have been pulling back from indirect lending for several years, dropping from a high of over 22% in 2023 to 19.4% in Q1 2026, according to Callahan & Associates. And with fewer Isaacs on the books, membership growth has also slowed, at 1.8% year-over-year in March 2026.

Indirect lending is still a significant and useful part of credit union lending. It provides access, volume and member acquisition, helps credit unions compete where financing decisions happen quickly and can put available liquidity to work. Many institutions have well-managed indirect programs that support their broader lending strategies. The challenge comes when indirect lending is expected to do more than it was designed to do.

Membership Without a Relationship

In a cooperative model, membership has historically carried intention. Someone chose to enter because they expected the credit union to matter beyond a single transaction. A member who chooses a credit union first may begin with a checking account, build trust over time and then turn to the credit union when a lending need arises. An indirect borrower often enters in the opposite order: the loan comes first, while the broader relationship may or may not follow.

It usually doesn’t. MeridianLink reported in October 2025 that a typical credit union participating in indirect lending only converts 1% of those members to use additional products.

This is where mission-driven credit unions should pay closest attention. Community development depends on knowing members well enough to understand their circumstances, counsel them effectively and design products around real needs. Alternative underwriting requires context. Financial counseling requires trust. Simply putting a member on the books doesn’t necessarily create either one.

What Replaces Decreases in Indirect Lending?

Pulling back from indirect lending can happen relatively quickly; rebuilding direct demand is a slower process.

Organic loan growth depends on several connected factors:

• Whether the credit union understands where unmet demand exists.

• Whether current products and policies fit the needs of its members and market.

• Whether qualified borrowers are being lost through denials, friction or an unclear process.

• Whether existing members know the credit union can help with their next financial need.

• Whether community organizations and other partners are referring prospective borrowers.

• Whether lending, marketing, operations and leadership are aligned around the same opportunities.

A credit union might have considerable lending potential within its existing membership but lack the data needed to identify it. It might be reaching the right market with products that no longer match how people earn, borrow or manage financial disruptions. It might have strong products but limited awareness outside its current member base.

In other cases, the obstacle is broader. Deposit strategy, staffing, underwriting, member experience and execution may all be affecting the credit union’s ability to generate and retain direct relationships.

Community Connections Are Part of the Opportunity

Community connections are another frequently overlooked source of growth. Nonprofits, workforce organizations, housing groups, public agencies and small-business support organizations encounter financial needs before those needs become loan applications. They can help a credit union understand where existing products fall short, reach prospective borrowers and build referral pipelines grounded in trust.

No single approach will address every situation. The starting point depends on what is limiting growth. The more a credit union can ensure it can generate growth through relationships and capabilities it owns, the stronger it is with or without externally sourced lending.

For some credit unions, the first need is a clearer picture of where loan opportunities exist and what is preventing them from becoming applications or approvals. Others need a more comprehensive look at the organizational issues affecting growth. Still others need stronger connections with the organizations already serving prospective members in their communities.

The more a credit union can generate growth through relationships and capabilities it owns, the stronger its position is — with or without externally sourced lending.

Read more from Joe Brancucci in his lending series, "From Relevant to Compelling."

Looking for the right starting point for organic loan growth? CU Strategic Planning offers several ways to help credit unions identify opportunity, address barriers to growth and build stronger community lending pipelines. Explore CU Results, the Lending Growth Blueprint and Community Development Summits to find the approach that fits your credit union.