How Businesses Can Benefit from a Credit Union Small Business Loan

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.

What Is a Personal Guarantee?

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.

Why Credit Unions for Small Business Loans?

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.

Pros of Credit Union Small Business Loans

Credit unions are generally a good place for people, and that includes business owners.

1. In addition to some of the lowest rates on financing, credit union members will be prioritized with lower rates over making a buck, which isn’t usually the case with a for-profit institution such as a bank.
2. Business transaction fees are normally lower than those of a bank. A credit union wants to take care of its members. A bank wants to make a profit. One way credit unions keep costs low for small businesses is to not run up the charges for payment services or processing fees.
3. Don’t be surprised if you get an answer more quickly. Credit unions can process loan applications faster. This is in part due to fewer customers, but that also means more personalized service. Plus, it’s fortuitous for someone wanting to get their business on track quickly.
4. You may have the option to take out a smaller loan, compared to minimum loan amounts available at a bank. This can be a huge pro because not only are you paying off the loan itself, you have to think of the amount of interest you’ll pay over time. With a smaller amount—closer to what you actually need—your financial well-being down the road is being considered today.
5. Who can forget good customer service? When people like where they work, they’re more apt to be friendly, helpful, and go out of their way to provide extra assistance. It’s likely your name will be remembered, and your loan officer will have more time for you since they have fewer loans to follow-up on.

Cons of Credit Union Small Business Loans

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.

1. Credit unions might not have as many brick-and-mortar locations as a bank. This may be of concern for some business owners. However, there is an ATM network set up to support many credit unions. Businesses have access to online banking as well.
2. Credit unions aren’t as recognizable or renowned as banks. The big national banks are known by most people. For some, name recognition can play into making the choice to apply or not apply for a loan. But the larger a financial institution is, the higher the chance you’re going to be dealing with a loan officer who’s unfamiliar with your community and situation. They might not even live in the same state as 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.