Banks are holding on tight to their cash, but credit unions are becoming more obliging to small businesses. While banks are making fewer loans, credit unions nationwide are making more.
Take Ralph Raby, who owns a carpet and rug firm in New Mexico. He had been trying to secure loans to renovate two buildings he owns. He had lending commitments from two banks but he saw a direct-mail flyer from the New Mexico Educators Federal Credit Union and decided to investigate. Within 60 days, Raby had a loan from the credit union for a longer term and at a better interest rate than the banks had offered. “They were very affordable in comparison, and they were very aggressive. I hadn’t looked at a credit union as a being a source of commercial lending, but they caught me off guard.”
According to Henry Kertman, vice president of public affairs for the California and Nevada Credit Union Leagues, the average credit union business loan is approximately $220,000. “And when a credit union lends to one of its business-owning members, that money stays in the community the credit union serves, and helps employ area residents.”
Credit unions are officially set up to serve specific groups and regions, but Kertman says it’s easy these days to find one near you and qualify to be a member. Check out the website Find a Credit Union to find credit unions in your vicinity and what their membership requirements are.
Many of the nation’s 7,500-plus credit unions might be making even more loans if they can persuade Congress to change a law that caps how much they can lend. Currently, the law caps credit unions’ business loans at 12.25 percent of their assets. Credit unions want that cap increased to 27.5 percent.
Today, when their business loan portfolios hit 7 to 8 percent of their assets, credit unions start slowing down their business lending. But credit unions work together to prevent that from happening, says David Donovan, vice president of commercial services at USC Credit Union in Los Angeles, which serves faculty, students, and alumni of the University of Southern California. “Credit unions are collaborative rather than competitive institutions. If we are up against the cap (and right now, we’re only at 4 or 5 percent of assets) or someone did not qualify for membership, we would reach out to our contemporaries and refer customers to them, to and see if they could meet their needs. Certainly Bank of America and Wells Fargo would not collaborate to benefit customers.”
As your business gets bigger, you may need rise in stature in the banks’ opinion, but Kertman says that credit unions want to grow with you, and will do the same joining of forces mentioned above to offer the financing and services you need to expand.
Also, credit unions pride themselves on better customer service than banks offer small business owners. We don’t look at you in terms of the size of your loan, we look at you as a member,” says Donovan. “Whether your loan is $10,000 or $300,000, you get the same service at every level. Banks can’t say the same — for that low amount, they will probably do a robo-signing instead of looking over your business and working with you. There’s no incentive for them to do ‘microloans.’ For us, no loan request is too small.”