Comparing banks and credit unions
Around this time last year, the banking industry was under fire as numerous consumers rallied for Bank Transfer Day. Many were upset over the treatment they received from their bank or the monthly fees being imposed on various accounts. As a small business owner, those fees add up and take away from profits. One of the proposed alternatives was switching to a credit union, which a sizable amount of protesters went through with. Aside from just being fed up, there are a few reasons why making the switch makes sense for some small business owners.
The main difference between a bank and a credit union has to do with how they’re established. A credit union is a non-profit organization – a bank is for profit. That simple difference provides different benefits on both sides. Because a credit union is a non-profit, it receives certain tax advantages that it is then able to pass on to account holders. For instance, a credit union is often able to offer lower interest rates on loans and other financing options because it is taxed less than a for-profit business. This helps cut costs for business owners when the repayment period on their financing begins.
Because of these benefits, credit unions must limit account ownership to certain categories of people, for example, people who live in a certain community or work in a government school or department. Because the scope of account holders is so focused, credit unions are more likely to spend time getting to know the owner of each account and provide counsel that will help that business grow. Because it’s a financing option for the community, staff members want to see community business owners receive the funding they need to succeed.
This is not to say that traditional banks aren’t a viable option for business owners – these institutions have entire departments focused specifically on business ventures and may be able to offer more services than a credit union could. However, trends show approvals for loan applications at banks are on the decline, but on the rise at credit unions. So if financing at a bank isn’t working out for your business, consider applying for an account at a credit union.