Since 2016, small businesses are no longer required to sign a personal guarantee (PG) when they take out a credit union small business loan. This means that some business owners who weren’t able to provide a PG are no longer limited by the requirement and can start to build their dream business. Not surprisingly, credit union small business loan borrowers are some of the most satisfied with their lender, and according to a credit survey of small businesses from the Federal Reserve Bank in New York, conducted in 2015, these borrowers have the second-highest rate of satisfaction.
Before it was changed, a personal guarantee required a borrower to confirm they would be personally liable for any debts if their business failed. The change, implemented when a regulation from the Member Business Lending (MBL) was revised, has made it possible for many entrepreneurs to move forward with their business plans.
Although credit unions are gaining notoriety for being the financial institution for individuals in the community, credit unions cannot be overlooked as a great place for budding businesses to get the funding they need to put their plans into action. Credit unions are member-owned, so there aren’t the conventional written-in-stone rules of corporate, for-profit lending institutions. There’s more of a focus on financial success for both individuals and small businesses, and that means more moral support from tellers, associates, and other members, plus fewer charges for all the elements of running a business.
More often than not, credit unions are able to offer lower rates for businesses than other types of financial institutes, predominantly because credit unions are not-for-profit. There are normally both secured and unsecured loans available for small businesses, and because a credit union is part of a community, the staff often knows more about the local economy and the needs of the community. This means credit unions make decisions based on more than just numbers.
One thing to keep an eye on, however, is what sort of membership requirements the credit union has. It might be based on your location or the area where your business primarily operates. You might be eligible for membership based on your particular type of business. Do your research. Contacting or visiting your local community credit union will offer more clarity on how it directly affects your small business.
Credit unions are generally a good place for people, and that includes business owners.
Although there are a lot of things to rave about with credit unions for small business loans, it’s important to have the whole picture, particularly when you’re considering applying for financing for your business.
The level of convenience and accessibility might be the only issue that someone would have with a credit union. If you’re still interested in great low rates that can help support you as you get your business started, credit unions should be at the top of your list for lending institutions to consider as your review where to get small business financing.
If you have a stellar business idea—and a great business plan—let’s connect. Rivermark Community Credit Union is here for small businesses just starting off (and for those who have been around a while too). We’re ready to meet you, hear about your business, and look at the numbers. If you’re an entrepreneur and looking to get your small business off the ground, reach out to us today.