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The Advantages of Credit Unions for Businesses

The Advantages of Credit Unions for Businesses

No business can cope without capital. Whether you’re running a simple start-up and need those initial set-up costs to get going or if you’re in charge of a much bigger and better-established brand, looking to expand, it’s vital to ensure that you have the cash to cover your business needs, from purchasing new equipment to paying employee salaries.

Ideally, businesses aim to generate much of the money they spend themselves, through their own hard work and the sale of goods or services to their customers. However, there are many situations where businesses might find themselves in need of a little additional funding, and will look for local personal loan options and business loans from an outside source, such as a bank, private lender, or credit union.

Each of these options has its advantages, with credit unions standing out as one of the best options for modern businesses looking for financing and funding. Similar to banks in many ways, but set-up on a not-for-profit basis and focused entirely on members, credit unions are able to offer a wide range of advantages, and here are just some of the key benefits for business owners.

Easier Approval for Loans and Financing

One of the main issues many business owners, especially start-up owners, encounter when looking for business financing and loans is that it can be quite hard for them to get approved. Banks can be very strict in terms of who they approve for loans, often having fixed rules in place regarding credit scores and annual profit rates in order to make their decisions.

Credit unions can be far more forgiving and understanding towards applicants who perhaps have a weaker credit score or a lack of credit history. Often, they’ll be more willing to take a look at additional factors, like whether or not an applicant typically pays bills on time in order to come to a decision on approval.

Minimal Fees

When applying for any kind of financial service, be it a loan, a checking account, a credit card, or something totally different, you always have to read the fine print and take a look at what fees you might have to pay along the way. Banks can sometimes do a very good job of hiding these fees away and then surprising people with them further down the line.

Credit unions, however, often offer totally fee-free services or very minimal fees on their loans and accounts. This can make a world of difference, especially for new businesses that are trying to make savings wherever they can.

A Different Approach

Unlike banks, credit unions don’t have stockholders or board members, so they work purely and exclusively to please their members, keeping the focus firmly on those members at all times. This gives a credit union a different feel when compared to a bank, and members often report feeling more valued and cared about individually, rather than simply being seen as customers or numbers in a database.

Because credit unions work on a not-for-profit model, they’re not focused on getting the most money out of you through fees and interest rates; instead, they’re dedicated to offering the very best levels of service and support for every member, typically in the form of member-friendly policies and more forgiving processes.

Better Interest Rates

When looking for any kind of financing option or savings account, interest rates are one of the most important factors to take into account. Banks can often offer relatively low interest rates on savings account, preventing customers from building up much extra cash, while charging high rates on loans and financing, forcing people to pay back a lot more than they borrowed.

Credit unions tend to be far more forgiving in general and generous when it comes to interest rates, offering far higher rates (up to 10x higher than banks in some cases) on their savings accounts and much lower rates on loans and financing options, so you won’t have to worry about making much bigger-than-expected repayments when taking out a business loan

Final Word

You have a lot of options available to you when looking for business loans, equipment financing, and lines of credit, but credit unions can often prove to be one of the very best choices. With great rates, minimal fees, member-focused services, and high standards of member care, it’s no surprise that more and more businesses are starting to turn to credit unions as their first choice for funding.

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by Lottie Pritchard // Lottie Pritchard is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.