Brainstorm nontraditional loan products now to maintain lending as interest rates rise.

ON MY WAY home from the office recently, I drove past a farmer out in his field, chugging along on his John Deere tractor and towing his hay baler. He was in a hurry, probably because the same distant storm clouds threatening my daughter's soccer game looked to wreak havoc on his alfalfa.

That got me thinking about the saying, "Make hay while the sun shines." Still being in a credit union lending frame of mind, I got to thinking about how that logic applies to smart credit unions.

My farmer friend knew the warm, sunny weather wouldn't last. While things were good, he took action in anticipation of the not-so-good. Today, with lending at favorable levels, it's a logical time to plan for when things change.

Not to rain on your parade, but let's take a look at the horizon and assume-rather, guarantee-that interest rates will increase heading into 2005.

Here's how you can prepare for that inevitability and make some hay today:

* Promote adjustable- or variable-rate loans.

This gives members a competitive, low rate today, while protecting your bottom line from interest-rate shock. This option isn't as popular when rates are low, but it's viable for members as rates rise. It also protects you from being stuck with many low-interest loans when the cost of money is high.

Now's a good time to train or remind staff of the advantages of adjustable-rate loans so you'll be ready when demand increases.

* Look for new, nontraditional ways to reach members with loans.

Car dealers are a given, so ask members how you can fulfill their cash needs. Members spend their disposable income at appliance and furniture stores, cosmetic surgery providers, and orthodontists. They'd likely find alternative financing options attractive.

* Ramp up marketing of your second-mortgage programs when first-mortgage originations begin to slow.

Collaborate with local real estate firms for leads. Perhaps remodeling contractors and suppliers would be open to making referrals to your credit union.

* Look for loans that don't dry up when interest rates climb.