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Credit unions, small banks increasingly important to small-business owners

Credit unions have always played an important role in communities, offering local members friendly and efficient service in addition to a self-service coin counting machine that allows them to determine the value of spare change. However, it appears credit unions are also stepping up to the plate to provide better solutions for small-business owners.

Credit unions provide solutions
According to the U.S. Small Business Administration's "Small Business Lending in the United States, 2012" report, credit unions have become increasingly critical among the entrepreneurial and small company community. The research showed that even though the lending environment has slowly improved for smaller firms since the recovery began, those seeking financing still face significant challenges.

The study indicated smaller lenders represent the majority of institutions lending money to companies. In fact, the results found that "nondepository lenders such as credit unions, finance companies and others have become increasingly important as suppliers of credit to small firms."

Micro loans, the smallest business loans valued at less than $100,000, were still prominent, suggesting entrepreneurs may be turning to credit unions for smaller amounts of funding. These loans totaled $138.2 billion last year, compared with the $139.5 billion seen in 2011. While this does represent a decrease of about 1 percent, the drop was in commercial real estate loans, according to the SBA.

Local banks catching up
However, statistics suggest it's not just credit unions offering small-business clients better solutions. Local banks are also approving more loans for entrepreneurs who come to them for financing. Biz2Credit's June Small Business Lending Index revealed small bank loan approvals jumped to 49.8 percent last month, a slight hike from the 49.5 percent seen the previous month and a significant increase when compared to June 2012's number, which came in at 47.5.

"While approvals dropped slightly at big banks in June, overall small business lending rebounded in the first half of 2013," said Rohit Arora, CEO of Biz2Credit. "Banks, both large and small, are granting loan requests at much higher rates than they did a year ago. Small banks gained a slight bit of market share because they are more adept at offering SBA Express loans, typically under $350,000, which are easier to finalize and come without fees."

As entrepreneurs rely more heavily on small banks and credit unions, they may find their financial institutions can offer more solutions to assist their business and ensure they are able to grow.

July 19, 2013