Credit Union Business Loans

Credit Union Business Loans: Infographic

April 15, 2012 By loans Leave a Comment

Credit Unions have been the topic of late in the business loan industry because of the growing support for S.2231. This is the bill known as the Small Business Lending Enhancement Act designed to raise the limits on Credit Union Business Loans.

Few realize that Credit Unions enjoyed no limit lending until 1998 when a strict 12.25% cap based on their total assets was imposed which. The current push to raise this cap to 27.5% has issuers of traditional business loans on edge but most feel it would help the economy.

The infographic below illustrates the history of the fight and what the passage of S.2231 would mean for small business owners around the country. Of course only well qualified borrowers will be pursued by the aggressive credit unions if they are allowed to increase lending, but the following insight should be interesting to all.

Credit Union Business Loans

Source mygenfcu.

Filed Under: Business Loans Tagged With: credit union business loans

Getting A Business Loan Changed Greatly In 2011

December 31, 2011 By loans Leave a Comment

Where To Get A Business Loan In 2012

Credit Union Business Loan
CDFI Business Loan
Micro Lender Business Loan
Merchant Cash Advance

This year shed light on several ways to get a business loan. Some were good, but as the industry changes, so much remains the same. When big banks said no to a business loan, others stepped up to fill the void.

Credit Union Business Loan

First and foremost, a credit union is different than a traditional bank because it is owned by its members and technically not for profit. They tend to focus on customer deposits for revenues and attempt to originate competitive mortgages for their members. Membership to a credit union usually comes at a minimal cost and used to be industry specific. But things have changed and just about anyone can apply for membership. A credit union does have the ability to give out a business loan to its members but they amount of assets they can earmark for business loans is currently capped at 12.5%. There is a major push to raise this cap and allow credit unions to increase their place in the credit markets.

CDFI Business Loan

A little different, but also focused on extended local credit, are Community Development Financial Institutions, or CDFIs. They have been around for nearly 100 years but did not gain significant momentum until the creation of the Regulatory Improvement Act of 1994 when the Treasury got involved in funding CDFI initiatives and programs. Because of this Community Development Financial Institutions have access to SBA guaranteed business loans which expose lenders to less exposure than non-guaranteed funds. The CDFIs originated because these very lenders largely ignored communities in need who were plagued by poverty or lack of foreseeable profitability for a financial institution. Since the credit crunch of 2008, CDFIs have been a very viable alternative for those looking for a business loan.

Micro Lender Business Loan

In much the same spirit of credit crunch lending, Micro Lenders gained enormous popularity because of the ability to get very small loans without much credit history, if any at all. Initially most of the micro business loans were granted by private lenders in economic empowerment zones. An empowerment zone is an actual area which is designated for social, economic, physical and spiritual development. Before the establishment of such zones, these areas were again those neglected by traditional financial institutions who saw no upside to making a business loan based on the geographical location of the entity. But once capital was flowing into the area due to legislation, micro lenders began to look at a local business loan as an opportunity. A typical micro loan is around $1000 or less, but there are programs for up to $50,000 which can still be considered a micro business loan.

Merchant Cash Advance

The last alternative funding source making news this year were Accounts Receivable Lenders, now commonly referred to as Merchant Cash Advances, saw dramatic increases in applications since the credit crunch. The merchant cash advance has evolved slightly over the years and is a business loan based on future credit card sales. Business owners pay back their predetermined loan when they receive payment from their credit card sales. The upside that if sales do not meet expectations, then the merchant pays based on the lower sales. The rates are high but for merchants with the need for quick cash to keep their businesses running while waiting on money from sales to trickle in, this is an attractive option.

Of all the business loan options above, Credit Unions seem to be the most favorable for the borrower. However, as with most favorable programs these business loans are for very attractive borrowers only. If you do not have a high PAYDEX you will not be approved. The other options do serve their purpose but accept for very specific businesses merchant cash advances are too expensive to be worthwhile and micro loans simple do not provide enough money to be safely capitalized for long term success.

So as evolution of alternative lenders over the past year shows there in new interest by borrowers to get a business loan which if nothing else shows that the capital markets are on the upswing. But, even the most prudent business borrower need to be comfortable with all the elements of such programs before agreeing to sign on the dotted line.

Filed Under: Business Loans Tagged With: business loan, credit union business loans, Merchant Cash Advance, Micro Lender

Credit Union Business Loans

September 4, 2011 By loans Leave a Comment

One of the topics making news over the last few weeks has been Credit Union business loans. The reason may surprise you. Credit unions are completely member owned and therefore are never a burden to taxpayers, yet they are restricted when it comes to business loans.

As it stands right now, credit unions are only allowed to maintain a business loans portfolio of 12.5% of their total assets. This seems like a smart idea because of the number of bad loans extended in general since the credit crunch of 2008 but since the behavior of credit unions do not effect the taxpayer, it is time to raise the caps and let credit unions lend and fill the void in the marketplace.

Credit unions have shown an uncanny willingness to make loans over the last six months at a time when traditional banking lenders have cut back. An example of just how desperate credit unions are to originate business loans is the story regarding KIVA. KIVA is a website which helps entrepreneurs raise capital by allowing members to loan as little as $25 to a bigger traunch which goes to make up the desired amount of a business loan requested by the borrower.

This minimizes exposure to risk for the members who may choose to spread their investment in tiny amounts over dozens of loans and also opens up opportunities for small business to get financing. Some credit unions were funding initial loans on KIVA until the desired loan amounts could be raised from members on the site. A pretty resourceful idea if you ask me but it turns out that using funds like this counts against the asset cap and is a violation of the law as it pertains to credit unions.

The answer would be to raise the credit union asset cap as it relates to business loans and get more money into the hands of small business where it is desperately needed. Remember credit unions are different from regular banks and the business loans made by them are not backed by the SBA and therefore are not governed by the same restrictions. This means that the application process is more efficient and the qualifications, although stringent, are not as demanding. Simply put, it easier to qualify for a credit union loan than an SBA loan.

On key factor supporting the idea is that the small business lending fund which entices community banks to request capital in order to lend to small business has been less than a success to put it mildly. Community banks have shown less interest than anticipated by program officials and the result is that those needing business loans the most are simply not receiving them. Since there would be no out lay of funds if credit union caps are raised, it would seem like no brainer legislation.

Keep in mind that we are only talking about credit union business loans here and there are several other options for business owners looking for capital. We always suggest the free application process for an unsecured loan based on personal credit in order to fund business. The loans have no collateral and have no restrictions on how proceeds are used. To find out more, simply click on the form to the right.