When it comes to obtaining small business financing, you have choices. Getting a loan from a big bank may seem like the obvious choice, but there are some significant downsides to working with a large corporation as opposed to a community-based lender like Addition Financial.
While we have a preference for credit unions, we also recognize that some small business owners may be reluctant to choose a credit union over a bank. Because of that, we’ve outlined the pros and cons of getting the small business financing you need through a credit union.
The Pros of Credit Union Small Business Financing
Let’s start with the things that we think make credit union small business financing a big plus for business owners.
- Credit unions traditionally offer lower interest rates than banks. Banks charge the highest interest rates that the market will bear, whereas credit unions focus more on offering rates that are advantageous to their members.
- Credit union transaction fees are often lower than bank fees. The same idea that applies to interest rates applies to fees as well. Credit unions are owned by members, which means it’s in the credit union’s best interest to offer affordable fees for their services.
- A credit union may process your loan application more quickly than a bank would. As a rule, credit unions have fewer members than banks do customers, so that means they have fewer applications to process. A loan application may take months to get through a bank, and only a fraction of that time to be processed at a credit union.
- Credit unions offer smaller loan amounts than banks. For many small business owners, a little capital can go a long way. Large banks, especially national banks, may focus their attention on offering large loans and business lines of credits to the big companies that need them. Smaller companies like yours may get lost in the shuffle. At Addition Financial, we offer business loans that are ideal for small and medium-sized businesses.
- Credit unions offer more personal attention than banks. If you get a loan with a big national bank, the chances are good that you’ll rarely speak to your loan officer and may be a low priority for them in the event you need help. By contrast, credit union loan officers have fewer loans to administrate and more time for customers.
- Credit unions offer resources that banks don’t. Many credit unions provide business resources and valuable information to their customers. These may include general business information and assistance with specific aspects of business accounting.
- Credit unions do not charge intangible tax on commercial mortgage loans. That is .0020 percent of the loan amount and is a considerable savings.
We think that these are some pretty significant pros. As a small business owner, you need capital – but you also need an affordable way to get it and the personal attention you deserve. A credit union business loan or line of credit can offer you all of these things.
The Cons of Credit Union Small Business Financing
While we are certainly in favor of credit union small business financing, we’d be remiss if we didn’t point out a few potential downsides of dealing with a credit union instead of a bank. There are significant advantages to credit unions, but here are a few cons that you may want to keep in mind as you weigh your options.
- Credit unions may not have the same technological capabilities as banks. Online banking is the name of the game these days, and the truth is that large banks – especially national banks – may have technical capabilities and options that a small credit union doesn’t. If it’s important to you to be able to do everything online or to have a lot of bells and whistles for online banking, you may prefer the advanced technology of a traditional bank.
- Credit unions don’t have the same name recognition as banks. Let’s face it, everybody’s heard of the big national banks. You see their ads on television and you may even have a personal account with one of them. If you take comfort in name recognition, you may prefer to do business with a big bank even if costs a little more than it would to obtain business financing through a credit union like Addition Financial.
- Credit unions have fewer locations and ATMs than banks. One of the biggest advantages of working with a bank is that the larger ones have many locations where you can conduct business in person, if that’s what you prefer. Credit unions have fewer locations and ATMs, which may be a problem for some business owners.
The primary downsides of working with a credit union have to do with convenience. However, it’s important to keep in mind that many credit unions today, including Addition Financial, work hard to provide the same ease of use to their business clients that banks do.
The bottom line is that obtaining small business financing from a credit union can save you money and ensure you have the personalized attention and guidance you need to grow your business.
To learn more about Addition Financial’s business financing options, including loans and lines of credits, please click here now.