Finding business financing is among the major task while running a small business. Whether you need to open a business bank account, apply for a credit card or need a business loan, having a financial institution at your side can provide you with the financial advice and support you need to manage a successful business. Having said that, apart from banks and traditional lenders there are other compelling alternative options available—check out the best credit unions for small businesses.
Credit unions provide personalized customer service and cost-effective financial tools to help small businesses grow. They also accommodate small businesses with financial advice and services like retirement funds, small business loans, insurance, credit cards, checking and health savings accounts.
How do you know a credit union is the right option? Read on this article to learn why you should use a credit union for banking. We have also broken down our picks for the best credit unions for you to start your search accordingly.
What Is a Credit Union?
You might have known generally, what a credit union is. Practically, its a financial institution that offers a variety of financial products and services. Just like any of the other financial institutions, credit unions provide more-personalized service, lower cost on loans and fee along with higher interest rates on checking and savings accounts.
Everything You Need to Know About Credit Unions
- Credit unions are cooperative not-for-profit organizations, and the income they generate is put right back into their operations. It acts as a mutually supportive system and it works best for members, including small business owners. The funding process is easier as compared to banks—much lower rates, fast approval process, and quick funding.
- Credit Unions are community-driven organizations where members are part owners, and they vote on a board of volunteers as managers. Since they are integrally relationship-driven, they offer personalized customer service along with educational services and other benefits to their members.
- There are certain requirements to become a member of a credit union. Each credit union has its own set of member-eligibility requirements and some are more exclusive than others.
- There are two main types of credit unions: federal credit unions and non-federal (aka state-chartered) credit unions. Based on the type, they are regulated and insured. Most credit unions are federal based and are regulated by the National Credit Union Administration (NCUA) and backed by the National Credit Union Share Insurance Fund (NCUSIF). Whereas non-federal credit unions are privately insured.
- Credit unions services as similar to banks abut there are few key differences you need to know before you opt to choose one. Banks offer more rewards programs, credit card options, online and mobile banking along with local branches and ATMs. Credit union financing carries lower interest rates and fees, but the same can be found from a small local bank.
Types of Credit Union for your Small Business
- America First Credit Union
America First is a Utah based credit union and on top of the list because of its small business loan program among other products. Their business loan program is alike a traditional bank that offers various funding solution in form of business acquisition loans, equipment loans, commercial real estate loans, SBA secured credit line ($50,000 to $100,000), SBA unsecured credit line ($15,000 to $50,000), term loans (up to $15,000), SBA commercial auto loans (up to millions of dollars), working capital loans, and franchise loans.
Business credit cards are another great product of America First that involves cashback or rewards earnings that can be customized based on borrowers’ needs. Moreover, there are four business checking account options, nine business savings account options and five business certificates account options. In addition to the above-mentioned benefits, there is free online bill pay, payroll, business planning, payment processing, online statements, and E-alerts services as well for business owners.
Membership eligibility is limited to borrowers’ locations where they live or work. In addition, it operates in a few states, but its membership in co-operative banking allow access to nearly 30,000 ATMs within the U.S.
- Alliant Credit Union
Alliant is a Chicago based credit union with two physical branch locations. Just like America First, their membership in the co-operative banking allows members to have access to thousands of ATMs within the U.S.
Their best financial product is commercial real estate lending along with personal checking and savings accounts. Their features include free interest-bearing checking account with no minimum balance or monthly service fee, high-yield savings account, three IRA account, unsecured personal loans (up to $50,000), and mobile and online banking facilities as well.
The membership is very accessible and if you’re unable to qualify for their general membership, you can join their partner charity, Foster Care to Success, and then you’ll be eligible to join Alliant. Once you join their partner charity, an annual membership fee of $5 will be paid to the charity on your behalf.
- Navy Federal Credit Union (NFCU)
NFCU is the largest credit union in the nation. They offer a complete suite of services along with a wide array of financial tools for families and individuals.
The features include three types of low-fee business checking and business savings accounts, term loans (up to $25,000), Business lines of credit (up to $10,000), two types of business credit cards with limits up to $15,000, online and mobile banking, online bill payment, payroll, merchant processing as well as two different Navy Federal business credit cards. Moreover, they also provides business and retirement insurance, management tools, and six types of Navy Federal business loans.
You just need to be an active service member, veteran, family of an armed service member, or a civilian working for the Department of Defense to qualify for the NFCU membership.
- First Tech Federal Credit Union
First Tech Federal is a California-based credit union and is one of the most business-friendly credit unions that offers a wide range of online and digital banking tools.
Their best product for small business is their two business checking and three savings accounts with as little as a $0 minimum balance requirement. However, they not offer as many business loan programs as other credit unions on this list. While using First Tech Federal Credit Union services, you can make transactions among and outside First Tech accounts, detailed financial statements, online bill payment, as well as make online payment of your First Tech loan or credit card payments. Additionally, the features include five rewards credit card, commercial real estate loans, and personal loan options with over 40 physical branches and 30,000+ ATMs.
In order to qualify as a member, you’ll need to be employed in a First Tech sponsor company or work for the state of Oregon or work or live Lane County, Oregon or be a member of the Computer History Museum or Financial Fitness Association.
- Self-Help Credit Union
Self-Help is a North Carolina-based credit union that provides services for conventionally underserved communities along with financial tools for nonprofits and small businesses. Their best lending product is Self-Help’s small business loan program.
The features of Self-Help credit union include business savings account with no monthly fee, business money market account, specialized loans, term business certificates with APYs up to 2.48% for a 60-month account, digital banking, term loans up to $250,000, commercial loans, SBA 504 loans, and New Markets Tax Credit Loans, loans for green businesses and recovery loans for businesses.
In order to qualify, you’ll need to live, work, or study in an eligible county, meet certain family or employer criteria or become a member of the Center for Community Self-Help, which requires a $5 fee.
- Consumers Credit Union (CCU)
Consumers Credit Union (CCU) is a Illinois-based credit union that provides business savings account, business money market account with a minimum $500 fee, Four business checking accounts options with little fees, merchant services with included point-of-sale system or software if you’re an online business, three different business savings accounts, and Visa business credit cards with digital banking services. Their business loan program includes commercial mortgages, equipment loans, business lines of credit, and construction and development loans.
In order to become a member of Consumers Credit Union, you need membership of the Consumers Cooperative Association (one-time fee of $5). In addition, you don’t have to live, work or study in a specific location, in order to become a member.
- Digital Federal Credit Union (DFCU)
Digital Federal credit union is a Massachusetts-based credit union and functions on equity crowdfunding where the members can invest in community businesses and can be used by both ambitious investors and entrepreneurs looking to raise capital.
Their financial tools include checking and savings accounts, credit cards, two business checking accounts, several business savings accounts, including certificate accounts, money market accounts, and IRA options for employees, and two no-fee business credit card options. The business loan programs include business lines of credit up to $3 million, term loans up to $3 million, commercial mortgages up to $5 million and commercial construction mortgages up to $5 million.
Their best financial tool is the free DFCU business checking account, which requires no minimum balance and no maintenance fee, as well as the Premier Business Checking account, which is interest bearing. In addition, both of these Digital Federal Credit Union business accounts include free mobile and online banking.
In order to become a member, you’ll need to live, work, or study in a DFCU eligible community, or work for a DFCU eligible company or be related to a current DFCU member.
- Boeing Employees Credit Union (BECU)
Boeing Employees Credit Union (BEC) is a Washington-based credit union and everyone from Washington State, Oregon and Idaho counties, and selected eligible associations are eligible to become a member.
In addition to its financial services, BECU offers a strong business-banking program. The features include two different business checking accounts, free electronic debits and credits, free online banking and bill pay, free e-statements, remote check deposits, no-fee savings account, Money Market accounts, fixed-rate CDs, and investment and retirement accounts. Their business loans programs include term loans up to $250,000, business vehicle loans with APRs as low as 3.39% for new vehicles or 4.14% for used vehicles, secured and unsecured credit lines, commercial real estate loans for up to $15 million and payroll and merchant services for small business owners.
Credit Unions Business Loans
Like traditional banks and alternative lenders, credit unions also provide a wide range of business loan options. Here’s an overview of some of the business loan programs offered by credit unions:
- Small Business Administration (SBA) Loans
Small Business Administration loans are the most popular funding option for businesses with a strong credit history. SBA loans low rates and favorable terms. The SBA guarantees up to 85% of the loan amount, making it less risky for credit unions and other lenders to approve money to small businesses.
The only downside of SBA loans is a lengthy process. Since SBA loans are competitive, a strong business and personal credit history can get you quick approval on these loans. SBA also offers several loan programs including standard 7(a) program up to $5 million, 504 program, SBA Caplines, Export Loans, Microloan, and Disaster loan program.
- Installment Loan
Credit Unions provide a specific lump sum of money where regular payments are made on a scheduled basis, monthly or daily basis. Mortgages and auto loans are common types of installment loans. These loans are also called term loans with varied rates and terms from $50,000 or higher. The interest rates on installment loans are determined based on the borrowers’ creditworthiness. These loans can be used for larger purchases.
- Business Lines Of Credit
A business line of credit is another business loan options offer by credit unions and it works like a credit card. It allows borrowers with a given credit limit and multiple draws can be made on the account by the borrower a needed up to the principal amount. A business line of credit can be used for many business purposes such as for emergency expenses, manage cash flow during slow seasons, purchase inventory, or pay for other business expenses.
The Interest rates are little higher on credit lines as compared to installment loans. The borrower will only pay interest on the amount used. The qualification criteria and credit requirements are less strict for a credit line. Borrowers with poor credit score might have to put up some assets as collateral to use the line of credit.
- Startup Loans
Getting a business loan for startups is challenging and extremely difficult. Startups are considered risky, and without solid financial documentation and no credit history presents an even higher risk.
But it doesn’t mean there are no options for startups. Credit unions provide startup loans to small businesses. There are several SBA loans as well for qualified startups while some lenders have their own programs for new businesses. Using a personal loan via credit union can help fund startup projects and business expenses.
- Business Credit Cards
Many qualified businesses can also secure funding via business credit cards. It works just like a personal credit card and can be used for business expenses. These cards carry a maximum credit limit where borrowers can spend up to this maximum. The interest rates are charged on the balance of current charges, and not against the entire credit line. The borrowers have to made monthly payments with interest. Once the balance is paid off, the funds will be available again for use by the borrower.
- Commercial Mortgages
Getting a commercial mortgage can help businesses purchase, renovate or refinance an existing commercial real estate through a credit union. Commercial loans offer competitive interest rates and down payment requirements. You can also secure 504 or 7(a) SBA loans for this purpose. The qualification criteria along with interest rates and repayment terms can vary by lender.