Using Credit Unions For Small Business Loans

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Using Credit Unions for Small Business Loans

The last couple of years have been more than challenging for small business owners in North America. The “experts” state that the current recession began in December 2007 and is just beginning to ease. The stock market in the US is having more good “closing bell” reports, and of course, the huge banks that were considered “too big to fail” received BILLIONS of dollars in bailout money. But what about you, the small business owner? Where is YOUR bailout? The banks were supposed to use their bail out money to lend to businesses, but most small businesses haven’t received much of a stimulus.

But wait! Small businesses DO have other options! Have you considered your neighborhood credit union or community bank? There are many benefits to using credit unions (CUs) and community banks (CBs) for your business finances. First of all, just like most small businesses, CUs and CBs are locally owned and managed. Just like you, they have a vested interest in your town or city. Second, they have money to lend. Third, for the most part, they were not affected by the financial meltdown because they did not make those risky loans in the first place. Finally, CUs and CBs specialize in the micro-loans that many small businesses need. While the big guys deal in deal amounts of millions and billions of dollars, a loan of as little as $10,000 - $15,000 is all some small businesses need to stay afloat.

This post will detail how a credit union can help you, the small business owner. A future post will give you the information you need about using a community bank in your city or town.

Credit Union Membership: Credit unions are not-for-profit and owned by their members, not stockholders. When you join a credit union, you become a “member” and any profits are paid back to you in the form of “shares”. You can become a member of a credit union for as little as $10, and usually all that you need to meet membership requirements is to live, work, or worship in the credit union’s geographical area.

Credit Union Financial Transactions: For the most part, you won’t be able to tell the difference in your regular transactions from those done at a regular bank. You can have personal and business savings and checking accounts, certificates of deposit, business services such as electronic payroll, money market accounts, and credit and debit cards. Most credit unions have the same electronic transfer functionality as the big banks; you will be able to accept electronic payments, and utilize to your online accounting software application to manage your financial accounts. The safety of your credit union funds are guaranteed by the National Credit Union Administration (NCUA), which is backed by the full faith and credit of the United States of America.

Credit Union Small Business Loans: Credit unions also offer SBA 7(a) loans; the average credit union-funded SBA 7(a) loan is $82,850. Although credit union/SBA 7(a) loans make up only a small number of these SBA loans, these SBA guaranteed loans may be available to you.

Most owners of very small business and SOHOs (Small Office Home Office) entrepreneurs find that there are online business applications especially designed for them; you can find many of these apps through the Small Business Web Group. You may want to consider whether you can meet your financing needs through a credit union or micro lender before turning to potentially high-cost options like credit cards or factoring.