When Seeking Funding, Credit Unions Can Be Worth Checking Out More credit unions are offering business loans, and their interest rates and fees are often lower than at commercial banks. What's more, their loan officers typically have more flexibility and decision-making ability than those at larger institutions.
By Gwen Moran Edited by Frances Dodds
Opinions expressed by Entrepreneur contributors are their own.
While only offered at roughly a third of all credit unions, business loans are the fastest-growing segment of these member-owned institutions' loan portfolios, showing double-digit growth in three of the past five years. Could a credit union be the answer to your financial needs?
"Because credit unions are member-owned financial cooperatives, we don't have to make a lot of money," says Mike Schenk, vice president of economics and statistics with Credit Union National Association (CUNA), a Washington, D.C.-based trade organization. "You'll often find interest rates and fees lower than at commercial banks, and because the small-business borrowers are members, the credit union leadership is often likely to have more flexibility in lending to them."
At the same time, credit unions aren't interested in taking on a lot of risk, so it's important to shore up both personal and business credit scores before seeking loans. If you have black marks, be prepared to explain them to the loan officer, who may have more authority in making a decision than the loan officer at a larger bank with stricter regulations.
General business services tend to be limited at credit unions, says CUNA spokesman Patrick Keefe. Most offer basic deposit services such as free or low-balance checking (78 percent), savings accounts (75 percent) and money market accounts (68 percent). However, less than half offer specific business checking (41 percent) or premium business checking options (26 percent). Services such as sweep accounts and account-analysis services (offered by 9 percent and 11 percent, respectively) indicate that only a few credit unions are serving larger, more complex businesses.
To find a credit union near you, see CUNA's online credit union locater at cuna.org. You can search specifically for credit unions that offer business loans and examine the criteria you'll need to meet to become a member.
