Helping small businesses access the capital they need

Despite increasing signs that the overall American economy continues to inch towards a gradual recovery, many small business interests still find it difficult to access the capital they need to survive and thrive.  As American small businesses are the pistons of our economic engine, doing everything possible to enable their success is a critical component of the mission of credit unions.

Many small business owners would recognize great benefit by easier and quicker access to debt recapitalization plans. And credit unions are prime candidates to offer such plans.

When the housing market burst a few years ago, the home equity lines of credit that were the capital lifeblood of many small businesses constricted and became far less available. Unfortunately, many small business owners have turned to credit cards when they need access to quick funds. Credit cards are a bad idea in this regard for several different reasons. The two most obvious are that credit card repayment terms are typically much faster than other types of loans and their interest rates, penalties and fees are much higher. Debt recapitalization loans allow for longer maturities, thus decreasing the monthly cash flow requirements on small businesses. This enables small businesses to operate leaner, more innovatively and to the betterment of the economy, both locally and nationally.

In addition to debt recapitalization programs, credit unions can help address this need for capital with:

• Secured and unsecured lines of credit
• Working capital loans
• Loans for the acquisition of equipment and commercial real estate

Now is the time for credit unions to take an honest look at their small business lending and business services programs. Offering these products to small business members can lead to larger loans and increased business services as those businesses mature in the future. Offering loans and business services such as these also builds loyalty and can increase product per household penetration in the form of higher business deposits, higher demand for vehicle loans and other traditional credit union products for businesses and their employees.

Is your credit union doing all it could to aid small businesses in your area? If not, you may be missing out on golden opportunities to aid the economic recovery, improve business life in general in the neighborhoods you serve and positively impact your credit union’s bottom line.