If you’re in the process of opening a new business, one of the first things you’ll need to think about is how you’re going to finance it. While you can use personal savings and perhaps even a small personal loan from your bank, many business owners prefer to get their capital from another source their local credit union. What are credit union business loans? What are they good for? How do they work? Read on to find out!
What type of Business Loans are you looking for?
I’m starting a small company, and I’m trying to figure out how to get the money I need. It seems like credit unions offer all kinds of services, but there are also different types of loans. So what exactly is a credit union business loan Is it available to me And do I have any other options?
So, let’s break it down. A credit union business loan is essentially a small-business loan from a credit union, which means it’s a short-term loan (up to seven years) and carries lower interest rates than most corporate loans or traditional bank loans. You can use them for almost any kind of expenses you’d like, including new equipment purchases, construction costs, or anything that contributes to your business’s overall growth.
When do you need your Money for Your Business?
I often hear people talk about when they will need their money, what they will use it for, and how much they need. Having a clear goal in mind can help you narrow down which credit union business loan is best for you. Here are some common uses for your money
– Need access to cash (e.g., getting started)
– Buying equipment or inventory
– Paying down debt with high-interest rates
– Covering operating expenses during slow periods
– Funding expansion (e.g., staffing, marketing)
Who can get approved for Loans from Credit Unions
These loans are often a popular choice for small businesses. A credit union is one of the several different financial institutions that offer these loans, and most notably are not-for-profit organizations that exist for their members. In order to be eligible for this type of loan, you must become a member or open an account with the credit union.
You can qualify for this loan if you have a reasonable repayment history, demonstrate a past track record of success in running your business, and show your capability to repay any loan with reasonable terms set by the bank.
Credit unions are often more likely to grant smaller amounts than banks, which makes them more accessible.
What information will you have to supply to a Lender to get approved for a Business Loan from a Credit Union?
When you’re looking for a business loan, it’s important to know what you can expect from the lenders. So if you’re considering a loan from a credit union, here are some things to consider
- The most common type of credit union business loan is the unsecured small business line of credit which gives access to funds without security. These loans can be used for anything, but are typically meant for day-to-day expenses like payroll and general operating costs. They often come with lower interest rates than secured loans but may require monthly minimum payments and higher fees or rates on unpaid balances.
- When using your equity in your home as collateral, some credit unions will offer mortgages with competitive interest rates and reasonable qualification standards
- Other types of credit union business loans include real estate financing, commercial financing, and equipment leasing. Some banks will also work with members to find an appropriate loan option that suits their needs – so you should check out more than one financial institution before choosing where to apply for a loan
- The best way to explore your options is by visiting the websites of these institutions
- Once you’ve identified which type of lender might be right for you, contact them directly
- You’ll have to provide basic information about yourself when applying including income levels and existing debt
- Once approved, make sure that all agreements are written down clearly.
What types of fees are associated with business loans from credit unions
Typically, there are five types of fees origination fee, application fee, closing fee, prepayment penalty, and interest charges. Some credit unions might charge more than five types. Fees may vary depending on the loan amount and type as well as your credit history. Some credit unions don’t charge any application or origination fees while others might only charge one.
The application fee can cost up to $100. The closing fee is charged at closing and is typically equal to one percent of your loan amount. The prepayment penalty can cost you three months’ interest on a five-year loan and six months’ interest on a ten-year loan. If you’re seeking a long-term business loan, you’ll most likely pay higher monthly payments due to interest charges than if you were to borrow for one year or less.