Credit unions are an important source for PPP and other loans for small businesses
By Christopher Starr, Director of Technical Assistance
Many small businesses are looking for resources and support to make ends meet during the coronavirus pandemic. The Small Business Administration’s Payroll Protection Program (or PPP) is one of the most well-known sources of funding and available through financial institutions that partner with the SBA. Many people have applied through traditional banks for a loan. Unfortunately, because traditional banks have been using their usual, strict underwriting standards to decide whether or not to give a loan—rather than taking into account the unusual circumstances caused by the pandemic—too many small businesses have been denied a PPP loan. However, traditional banks aren’t the only source for PPP and other loans to help you get through the pandemic. If you’re a small business owner looking for financial support, consider going to community development credit unions (CDCUs) for a loan.
What’s a credit union?
Credit unions are nonprofit, member-owned financial cooperatives. Like banks, they provide members with access to savings and checking accounts, loans, and other services, and they are regulated and fully-insured financial institutions. But their nonprofit, member-owned structure means they can provide more affordable rates than other lenders and their underwriting standards are more inclusive and community-friendly compared to traditional banks.
What’s a CDCU?
Community development credit unions (or a CDCUs) have a mission of serving low- and moderate-income people and communities, which often have limited access to safe financial services.
According to Inclusiv, CDCUs specialize in providing:
- Fairly-priced loans, even if you have imperfect, limited, or no credit history;
- A safe place to save and build assets;
- A place to conduct transactions at reasonable cost;
- Financial education and counseling for its members; and
Products, services and support that can help members to free themselves from high-cost and predatory debt, gain control over their personal finances, and achieve economic well-being
CDCU Loan Products for Small Business Owners
At a time when so many small businesses are looking for money and resources to stay afloat, CDCUs can be a lifeline. Unlike traditional banks that tend to have very strict underwriting standards, even in unusual circumstances like the coronavirus pandemic, CDCUs tend to have more flexibility and experience working with members who may not meet traditional lending requirements, such as those with limited or no credit. As a result, they tend to have more affordable loan terms.
In addition to PPP loans, CDCUs across the country have a number of loan products available to small businesses that could be good alternatives:
- Working Capital Loans – Working capital loans help a business cover its short-term operational needs such as accounts payable and payroll. Freedom First Federal Credit Union in Roanoke, VA and Opportunities Credit Union in Burlington, VT offer working capital loans with reasonable interest rates.
- Small Business Loans – Small business loans can be used for a variety of needs such as purchasing inventory, supplies or materials; acquiring and/or improving machinery, equipment or real estate; working capital and more. Self-Help Federal Credit Union in Illinois and Lower East Side Peoples Federal Credit Union in New York City both offer small business loans.
- Community Assistance Loan Fund – Alternatives Federal Credit Union in Ithaca, NY is offering loans for up to $8,000 per business, non-profit, or organization to cover costs or lost funds associated with COVID-19.
- Financial Hardship Loans – One Detroit Credit Union in Detroit, MI is offering $500-$3,000 financial hardship loans to anyone impacted by the financial fallout of COVID-19.
- Emergency Loans – Emergency loans are often personal loans to help with day-to-day expenses or to fill the gap in monthly income. Santa Cruz Community Credit Union in Santa Cruz, CA is providing low-rate emergency loans you can apply for any time from your computer, tablet, or phone.
How do I apply for a loan?
Applications and requirements will vary depending on the CDCU. To find a credit union near you, check out this tool from the National Credit Union Association.
Read the original article on Medium here.