Most of the time, when business owners (new entrepreneurs or experienced proprietors) think about financing their businesses, they think about their local banks – which they should. After all, they drive by these organizations everyday and might even have an account or two with them.
But, there are times when these banks might not be the best options for landing a needed business loan – either because the bank does not offer the loan product your company needs or because (like most of us these days) you just do not qualify under their heighten standards.
However, that does not mean that you still cannot get the financing your business wants – from start up funding to growing an established business – from a local financial institution other than your bank.
Did you know that some local credit unions also offer business loans? And, do you know that if they don’t, they do offer other financing products that you can use to start or grow your business?
Credit Unions For Business Financing
If you can get a loan from your bank – great. You should start there. But, if you can’t, simply drive right over to your local credit union and see what loan programs they offer.
Not only do you stand a good chance of getting the capital you need but you might be able to do it cheaper and with a lot less hassle.
Let me explain: First let’s call these CU for simplicity.
CUs, when it comes to business financing, offer the following benefits:
1) Business Loans – Some CUs do provide true business loans – the same products that your local bank offers. And, there are more of them doing this then you think.
Further, in many cases, if the CU does make business loans they usually don’t have such high credit standards that other lenders do. CUs tend to focus more on how your business and their loan impact the community at large – not just their bottom line. Most CUs have lower credit score requirements, better debt ratio limits, lower overall collateral value levels and usually spend less effort on scrutinizing income and tax return information. Simply put, their business loans (the same products that banks and other business lenders offer) are easier to qualify for.
According to State Employees’ CU in Raleigh, NC, when talking about how they underwrite their loan products:
Our focus is not on profits, but on fair, quality service.
So, not only are there underwriting criteria easier to pass, but since they make their loan decisions locally, they tend to take more of your story into account – which only benefits you and your ability to get approved.
2) Personal Loans – while banks also offer personal loans, again, CUs have easier approval standards. And, they are more flexible in the products they offer – making their loans fit you and not the other way around.
Now, you might think that you don’t want a personal loan for your business. But, I am here to tell you that all loans, business, personal or otherwise, from banks, CU, or private lenders, are in fact all personal loans.
Here’s why. You apply for a business loan – the type of lender does not matter – and you jump through all the hoops required to qualify. They look at your revenue or income, they look at your current debt, they look at and valuate your collateral and in the end, they approve your request.
They tell you what your monthly payment will be, they tell you how they are going to attach a claim to your assets and then – here is the kicker – they make you sign a personal guarantee – even on a business loan.
And, it is this personal guarantee that washes away all that other stuff about business credit facilities. Because, if you or your business do not pay as agreed, that personal guarantee allows that lender – bank, CU, private lender – to come after your personal income and assets to make that loan whole – which is the very definition of a personal loan. The one single item that you are looking to avoid by getting a business loan – avoiding personal risk – is also the one single item you cannot avoid, no matter what type of loan you are requesting.
However, there is nothing that states that you cannot use the proceeds from a personal loan in or for your business.
Bottom line here for you is this: If you can’t get a business loan, look to the personal or consumer products CUs offers. Money is just money after all and CUs make getting your hands on that needed money (personal or business) easier.
3) Cheaper All The Way Around – As CUs are non-profit, they have lower application, origination and processing fees on their loan products. They have lower annual fees if any (say on lines of credit). And, they usually charge lower interest rates.
All items that do nothing but benefit you and your business. Why over pay when you don’t have too?
From MyCreditUnion.gov credit unions offer:
Fees and loan rates at credit unions are generally lower, while interest rates returned (dividends paid on deposits) are generally higher, than banks and other for-profit institutions. Credit unions are democratically operated by members, allowing account holders an equal say in how the credit union is operated, regardless of how much they have invested in the credit union.
As I have hoped to point out here, if you already have a relationship with a local bank, then by all means approach that bank for your business loan needs. But, if you don’t or if they turn you down, there is no reason that you cannot just drive right over to one of your local credit unions and see if they will say yes to your same request.
Credit unions offer a lot of benefits when it comes to business financing, namely being easier to qualify for. So, in the end, does it really matter where or what form your business loan come in? Money is just money after all.