The size of the $200 million-asset credit union based in Cody, Wyoming, works against these efforts.

"We're a community credit union in a small, rural area, and the sheer number of deals and available business opportunities is not the same for me as it is for somebody in a bigger state or bigger market area," said Jim Handley, the credit union's chief credit officer.

To address this shortcoming, Sunlight is working with Avana Capital, a lending subsidiary of the Peoria, Arizona-based Aana Companies, to gain insight into the pricing levels of potential deals relevant to the market and help broker both the sale and purchase of CRE loan participations across the U.S.

Avana's network of in-house credit analysts review the terms of a loan before it is offered to the member and recommends concessions such as additional guarantors to reduce the likelihood of any delinquency. After being approved by Sunlight's underwriters, Avana helps sell the remaining portions of the deal to other interested financial institutions. It has worked with Sunlight since 2021.

Sunlight has more than $18 million in commercial loans secured by real estate to members and just under $34.5 million in purchased participations for similar loans at other institutions, according to Third-quarter call report data from the National Credit Union Administration. The average value of each participation was just under $1 million.

"A larger bank isn't gonna necessarily mess with a smaller credit because their minimum size for a deal might be $10 million or something along those lines. … But for a deal, say $5 million in size, that investment size split among numerous smaller institutions is attractive to organizations that don't have just an endless supply of money to do deals," Handley said.

Consumer lending appetites continue to pull back in the face of record interest rate levels and continuing uncertainty regarding future Federal Reserve hikes, forcing lenders to seek out more diverse opportunities while adding measures to vet borrowers.

But for others that don't sufficiently monitor the risks associated with areas such as CRE, which include commercial mortgages and construction loans, unrealized losses could prove troublesome.

Shivan Perera, senior vice president of participations and debt for Avana Capital, said the firm's continual portfolio servicing, when combined with ample diversification, is a crucial method for lessening the impact of any one market segment's poor performance.

"Risk is not always just at the loan level, there's also portfolio risk as well. … There are a lot of shops out there that are more concerned with production, but we always emphasize credit first and production second," Perera said. "Credit union consolidation is a growing trend, so we're very focused on preserving the industry however we can."

Delinquencies and charge-offs at credit unions nationwide rose in the second quarter, while community banking leaders expressed concerns that proposed capital reforms could further constrain lending activity for smaller institutions.

To streamline the process, turning to fintechs that specialize in aggregating data and structuring it into a more digestible format can free up resources for more involved cases.

By offloading the document gathering process, "the work is much easier since it's now a credit risk decision, minus all the hours and hours of people's time to gather and assess" financial statements, said Tim Scholten, founder and president of the community bank and credit union consultancy Visible Progress.

Small-business owners in the Western U.S. remain positive about growth opportunities for the remainder of 2023, despite worries of a looming recession.

The best way to weather market shifts involves proper management of the "existing book of business' credit quality" and diligence when reviewing outstanding agreements should be top of mind for wary leaders, said Joel Pruis, senior director at Cornerstone Advisors.