Credit Unions are member-owned financial institutions operating as cooperatives. They are managed by members and operate on the principle of people helping people. Credit Unions seek to provide members credit and other financial services at competitive rates.
The "people helping people" focus of the institutions has certain performance benefits: they "had one-fifth the failure rate of other banks during the financial crisis of 2007–2008 and more than doubled lending to small businesses between 2008 and 2016, from $30 billion to $60 billion..lending to small businesses overall during the same period declined by around $100 billion." Also, "small businesses are eighty percent less likely to be dissatisfied with a credit union than with a big bank." The listing below shows minority-owned credit unions in the US.
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To understand and navigate these issues we have provided information on credit union practices, rules and regulations.
Request AdviceTo borrow from most credit unions you need to be a member: "Members of a credit union share a common bond, also known as the credit union’s 'field of membership.'" As with banks, credit union loans "can be endorsed by co-signers, guaranteed by the government, or secured by collateral—such as real estate, accounts receivable, inventory, savings, life insurance, stocks and bonds, or the item purchased with the loan."
Banks are in business to maximize profits, which are then distributed to managers and shareholders. Credit unions, on the other hand, "exist to serve their members. Earnings of credit unions are used to increase rates of return on members’ deposits and savings accounts, and to decrease rates on loans made to members." As we noted in the section on bank loans, the interest rate charged on the borrowed funds reflects the level of risk that the lender undertakes. Other factors (geographical location, gender, race, education of borrower, etc.) influence the interest rate. These other factor are less prevalent at credit unions, but, let's face it, they are still present.
A credit union is a member-owned financial institution, so you need to be member to borrow from most. There are credit unions without this membership requirement, however. These include Alliant Credit Union, Connexus Credit Union, First Tech Federal Credit Union, America First Credit Union, Boeing Employees Credit Union (state of Washington, parts of Oregon and Idaho), Consumers Credit Union, Navy Federal Credit Union (if you’re a service member or veteran, you work for the Defense Department or you’re an immediate family member of someone who’s eligible), GTE Financial Credit Union, and Lake Michigan Credit Union.
As with bank loans, your eligibility will depend upon a number of factors: are you taking out a personal loan? Do you have any assets that can be used to secure the loan? How long have you been in business? Are you a woman or minority? Where are you (and the business) located? A personal loan has eligibility criteria that differ from those for a business loan. Length of the loan term is also a factor. If you just want an overnight loan, as opposed to a thirty year loan, the risk that the bank will not be repaid falls and so does the eligibility criteria. Other eligibility factors for person loans relate to employment, loan security, assets, debts and expenses, and your credit history.
Personal loans link to your credit as an individual and have rules that differ slightly from business loan requirements. You generally need a credit score that exceeds 550. (See our section on credit scores on the credit cards page). Even if you have bad credit, you can apply for a business loan using your personal credit information. Just be aware that the chances of approval go down, of course. You may have the option of a secured personal loan, but it’s less likely that you’ll need to provide collateral with a personal loan than with a business loan.
Most lenders require that you have a steady income, to help guarantee that you can make the minimum monthly payments as set by the loan contract.
You need to be employed on a full-time basis for most personal small business loans. You should note that If you’re employed part-time or are self-employed, there are still loan options. And also note that even if you’re unemployed, there are lenders who accept government benefits as a form of income, but these are few. Interest rates will be higher as well.
A secured loans uses an asset (car, house) as guarantee of repayment. With an unsecured loan, your credit score is the main factor used to determine if you get the loan. (Again, see the credit card section and our discussion of credit scores).
The following documents are required along with your Business or Personal Loan application:
Many credit unions have low or no fees on their business loans.
Other Fees include Late Payment Fees, Closing Fees, taxes.
Apply For LoanMinority Small Business Loan Options.
In a word, maybe. Your success will depend on what type of minority you are and the relationships you have built with financial institutions of all types. Many programs and efforts have begun post George Floyd. Some of the government programs for women and minorities include the following: SBA 7(a) Loans & 8(a) Business Development Program, SBA Community Advantage Loans, SBA Microloan Program, Accion U.S. Network, Union Bank, The National African American Small Business Loan Fund, and the Business Center for New Americans. I can tell you without fear on contradiction that these programs are a stop gap and unlikely to be helpful unless you meet a set of super restrictive criteria. (It helps if you are a veteran, btw.) APPLY TO THEM ANYWAY. Just know that, like commercial bank lending, on which many of them depend, your results will be spotty at best.
The first thing to do is to develop an relationship with a financial institution in your community. Look for alternatives, like credit cards. Focus on credit unions. Consider microlending, new forms of financing like crowdfunding, Initial Coin Offerings (ICOs), Security Token Offerings (STOs). Just know that whatever road you take, it is likely to be a long one. DON'T GIVE UP.
Grant programs are an option, but one that forces an even steeper uphill climb. Why? Given the lack of standard lending, grant makers are overwhelmed with minority individuals seeking funding for good projects. The same rules apply: develop a relationship with grant funders. Get a good grant writer. Do your homework. Programs include: Community Programs to Improve Minority Health Grant Program, Community Connect Grants, Rural Business Opportunity Grants, Partnerships for Opportunity, Workforce, and Economic Revitalization Initiative, Water & Waste Disposal Loan & Grant Program, MillerCoors Urban Entrepreneurs Series (a contest, not a grant program), the First Nations Development Institute Grant.
According to one website, a researcher followed nine people—three black, three Hispanic, and three white—who applied for $60,000 small business loans. All nine presented the same type of business, the same background, and the same reasons for wanting the loan. The minority loan applicants received less information about loans and less assistance from loan officers." You can imagine the outcome.
While the Federal Reserve does not regulate Credit Unions, federally credit unions (FCUs) are regulated by the National Credit Union Administration. However, state credit unions follow specific regulations according to their specific state. Different states may have varying interest rates, as well as deposit insurance. ? To see a list of Federal rules and regulations, please visit https://www.ncua.gov/regulation-supervision/rules-regulations�
At the federal level, there are six financial institution regulators relevant here:
At the state level, each state has an agency or agencies that are charged with supervising and regulating state-chartered banks and thrifts. For example, in California, financial institutions are regulated by the Department of Financial Institutions. A listing of state bank supervisors for all states is available at the website for the Conference of State Bank Supervisors. (https://www.csbs.org/state-bank-directory)
Use the links below to review sample loan application forms, draft business plans, a listing of all banks and credit unions in the US, and other helpful information. Download now!
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