Have you been considering taking the leap from hopeful entrepreneur to business owner? You’re not alone. In 2012, more than 514,000 people became new business owners. Although few of these start-ups will reach the mega-success of companies like Apple and Facebook, their founders all have one thing in common: they need help getting their business off the ground.
Budding entrepreneurs and small business owners might find no greater ally than local credit unions. Following the financial crisis, many business owners were abandoned by their banks, denied funding despite years of being loyal customers, and credit unions stepped in to offer support where banks would not. But this wasn’t a new trend in lending — the economic turmoil in our country shined a spotlight on the major difference between banks and credit unions, making clear to many what credit union members have known for decades.
Credit Unions Offer Entrepreneurs Unwavering Support
According to an August 2014 report by the National Association of Federal Credit Unions, credit union member business loans have grown 60 percent since 2008. Banks, on the other hand, held $585 billion in small business loans as of the first quarter 2014 — down 18 percent from 2008.
When small businesses hit hard times, many banks panicked at the possibility of default and stopped lending. Jeff Balestrini, Chief Lending Officer for Service 1st Federal Credit Union, a Pennsylvania credit union that serves nearly 22,000 members, witnessed this trend firsthand.
“They’re profit-driven, they’re not relationship driven,” stated Balestrini.
When a business owner lost his line of credit with a bank due to declining performance, he called Balestrini asking if the credit union could help. “This company probably would have gone out of business,” he explained. “[Bank representatives] were basically saying ‘we don’t care, your numbers are dropping, get out’ … obviously, they were hurt. This bank they thought they could trust turned its back on them.”
Service 1st gladly accepted the business, and as the economy recovered, so did the once struggling company’s finances. “It’s been about two years now, and it’s been an excellent relationship,” stated Balestrini.
Credit Unions Help Entrepreneurs Dream Bigger
Credit unions are a growing source of financing for small businesses — according to Entrepreneur Magazine, the average loan size granted by credit unions for business purposes is $212,000 — but lending is just one of many ways these financial cooperatives help entrepreneurs turn their dreams into reality.
American fashion designer Tory Burch, for example, launched the Elizabeth Street Capital program in partnership with several credit unions and banks to help women entrepreneurs start their businesses. Self Help Credit Union is one of the 18 institutions helping provide women access to capital through the program, as well as mentorship and networking opportunities.
Texas Dow Employee Credit Union is another credit union working to support future business owners. In partnership with the Young Entrepreneurs Academy, the institution provided middle and high school students the opportunity to start and run their own businesses with free DBA accounts and the ability to share their business ideas with members.
In addition to loans and programs designed specifically for entrepreneurs, credit unions are, by design, more nurturing of entrepreneurs. Due to their not-for-profit status, credit unions return revenue back to members in the form of lower fees and competitive interest rates. Also, because credit unions are owned by members, leadership is elected by vote, decisions are made locally and there is greater emphasis placed on personal banking relationships.
Can a Credit Union Jumpstart Your Small Business?
Because credit union membership is restricted to certain groups, you will need to find an institution you’re eligible to join before seeking assistance. Don’t worry — there are more than 7,000 credit unions in the United States, and many simply require that you live, work, study or go to church in one of the counties they serve in order to join. You can even use this handy locator tool to find your nearest credit union.
Banks may be the obvious choice when you want to secure financial support for your dream, but credit unions have consistently proven they’re truly invested in the success of small businesses. If you’ve got the next great idea to take the business world by storm, you might find it’s your local credit union that’s waiting to support you on the road to success.