Business Loans Through Your Credit Union

Credit union business loans can be effective commercial financing vehicles as an alternative to banks or private lenders. At one time, credit unions were restricted to serving members drawn from a narrow association, from one employer, as an example. Credit unions now can accept members with a far wider base of commonality, even those living in the same geographic area. Following are examples of business loans a typical credit union will offer.

Commercial Real Estate Loans

Credit unions can fund your purchase of developable land, income-generating property or new locations for your business. As with every commercial real estate loan, you will be expected to show a sufficient Debt Coverage Ratio. This ratio is the relationship between the monthly income from the property to the monthly payment on the debt required to purchase the property.

If the property is non-income producing, your business' financial statement must reflect sufficient ability to hand the debt.

Credit union business loans also can be used to finance equipment and inventory purchases.

Small Business Administration Loans

Credit unions, like banks, can authorize partially-government backed loans from the Small Business Administration. You must fall within the guidelines for any SBA loans. Programs include:

SBA 7A Loans. This is the basic SBA loan for small businesses. Credit unions apply for permission to offer the loans to qualifying small businesses and the loans are backed, in part, by the SBA. SBA 7A loans can be offered with competitive interest rates because of the government-backed portion.

SBA 504 Loans. These loans target economic development in low- and moderate-income communities.

Business Credit Cards

Often overlooked as a form of business loans, the credit card is a high-interest-rate financing tool. In exchange for the high rate of interest, the business gets a great deal of flexibility as to when funds are available, what to use them for and how to pay them back.

Often, a firm with multiple savings, checking and borrowing accounts at a credit union can negotiate more favorable credit card terms.

Business Lines of Credit

A line of credit for a business works in similar fashion to a credit card, but the cost to the business is less.

This type of business loan is an agreement between the borrower and the credit union that a negotiated sum of money will be available at all times for the business to draw from and use at its discretion, within agreed limits. Repayment terms are negotiable but typically offer the business more flexibility than conventional business loans.

Business credit cards are easier to obtain, which is part of the reason the interest rates are higher. With a business line of credit, you can expect to complete a full application, providing all required financial information to qualify for the loan. As a result, if you qualify, interest rates usually are lower.

Equipment Leasing

Credit unions can also facilitate leases for business equipment and fleet vehicles. Leases often require less cash upfront than loans to purchase equipment outright.