What is a Credit Union?
Credit Unions have become an increasing source of capital for small businesses and there are several differences compared to traditional banks. For one, credit unions are not-for-profit entities and do not use their profits to pay shareholders dividends. Instead, profits are used to offer their members lower interest rates, higher interest on deposits, and lower fees than traditional banks.
While traditional banks are owned by stockholders, Credit Unions are owned by members. According to the Credit Union National Association, “Each credit union member has equal ownership and one vote — regardless of how much money a member has on deposit. At a credit union, every customer is both a member and an owner.”
So, how do small business owners obtain loans from a Credit Union? In order to explain this process, we are using Evergreen Credit Union loan requirements.
How to Apply for a Credit Union Business Loan
Research the hundreds of Credit Unions and determine which would benefit your business and which you would qualify for. This means you need to check out their website and contact the proper Credit Union staff to see if they may be able to assist you. Credit Union sites, such as Evergreen Credit Union, should have a tab for business loans. If it does not, than that particular Credit Union may not offer business loans.
If you are not a member of the Credit Union you are applying to, you must become one. Look for membership information on Credit Union sites or call a staff member in charge of membership. There are membership requirements and not everyone qualifies for a particular credit union.
It is important that you have all the necessary materials when applying for a credit union business loan. Just like traditional banks, credit unions also require certain documentation to help them determine if you are a good candidate for a business loan.
This is the type of information you need when applying for a credit union business loan (these are Evergreen Credit Unions requirements, but apply to most credit unions as well):
- Member Business Loan Application [pdf] filled out
- Personal Financial Statement [pdf] filled out
- Business Financial Statements
- Documentation regarding any purchases to be financed with proposed loan
- Articles of Corporation
- Business Tax Returns
- Business Plan
- Projections for the coming year
- Resumes of Management
Not all Credit Unions have the same application requirements, so be sure to check with the Credit Union you are applying to.
Benefits of a Credit Union
There are many benefits to obtaining access to capital from a Credit Union including:
- Low Loan Rates
- Wide Range of Lending Products: Business Credit Cards, Consumer Real Estate Loans, Equipment and Vehicle Loans, Secured Lines of Credit, and Refinancing
- Member Service
General benefits of Credit Union membership include:
- Low APR on loan types such as student loans, auto loans, and credit cards
- Better rates of return on savings accounts and deposits
- Low-fee or no-fee checking
- Low or no minimum balances to maintain accounts
- U.S government insured up to $250,000
Is there something we missed? Let us know in the comments.