How Do Credit Union Business Loans Work?
NEW YORK, October 6, 2021 (Newswire.com) - iQuanti: Credit unions offer business loans with low interest rates and fees. This can be a great way for credit union members to access commercial real estate lending, and for non-members, it can be surprisingly easy to join a credit union. Read on to learn more about what options credit unions offer for commercial lending.
What Is a Credit Union Business Loan?
A credit union business loan works the same way as one you may receive from a bank. It provides financing you can use to run your business. Like a traditional bank loan, you are required to repay your loan over a designated time frame. You are also subject to credit union business loan interest and fees.
Types of Credit Union Business Loans
Credit unions offer a variety of business loans, including:
1. Installment Loans
An installment loan, also referred to as term financing, is one of the most common credit union business funding options. With a credit union installment loan, you receive a lump sum of money. From here, you make regular payments (installments) on a scheduled basis. Your payments are applied to your loan's principal amount (the amount you borrow) and interest that the credit union charges.
2. Lines of Credit
You can receive a credit union line of credit that works in the same way as a credit card. This financing option gives your business funding up to a credit limit. And you can use your line of credit on any business expenses, at any time.
3. Small Business Administration (SBA) Loans
Those who run a small business may qualify for a credit union SBA loan. This type of loan is backed by the government, which makes it less risky for credit unions and other lenders. Thus, a credit union SBA loan may offer a low interest rate and other favorable terms you won't find with other business financing options.
Credit Union Business Loan Interest Rates
Your credit union business loan interest rate will vary based on the amount you borrow, the type of loan you receive, and your credit.
Among credit union business financing, an installment loan tends to have a low interest rate, while a line of credit can have a higher interest rate. Meanwhile, credit unions establish SBA loan interest rates based on the SBA's standards; these rates tend to be competitive.
Should You Pursue a Business Loan from a Credit Union or Bank?
To determine if you should pursue business financing from a credit union or bank, examine both options carefully. You may even be able to get an example of your loan terms with a pre-approval. You can then weigh the pros and cons of business loans from credit unions and banks and proceed accordingly.
Credit unions are nonprofit organizations and are exempt from federal and state taxes. As such, they can generally provide business loans with lower interest rates and fewer fees than those available from banks.
On the other hand, credit unions often provide fewer lending services than banks. Credit unions can also require members to wait a certain amount of time before they can apply for a business loan, and different credit unions have different criteria for becoming a member. Credit union members may need to meet strict credit requirements to qualify for a business loan, too.
Source: iQuanti, Inc.