Overcoming the Challenges of Small Business Loan Growth | Credit Union Times

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There are internal and external competitors. The best investors know this and use data to guide the execution of strategies that address opportunities that threaten long-term growth and survival.

In boxing, shorter fighters are often seen as underdogs because fighters usually have a longer reach, which makes it easier. then they set up a line of attack, hit the ground quickly and leave a long distance to stop the enemy. Of course, it makes things difficult for short fighters, but height and reach are not the only keys to success. Good training, organized planning and solid execution can help boxers ensure their footwork, timing, hand speed and strength use their opponent’s strongest attributes against them.

For entrepreneurs who need cash, there are many financial institutions competing for their business. A commercial bank is usually first in mind when it comes time to take out a business loan or line of credit because, after all, traditional banks often have better technology and digital services for use. by customers, offering the use of many branch locations and a large ATM network, and providing a stronger choice of financial products, including investment accounts.

Although credit unions offer many financial services like major banks, including business loans, business and personal checking and savings accounts, auto loans, mortgages, personal credit cards personal and business, and the ability to bank from anywhere using the internet and mobile phones, these organizations are often overlooked due to their small size and membership requirements based on communication and geographic locations. In addition, the presence of credit unions is covered by a lack of knowledge that has been increased by large banks with a lot of marketing and advertising to strengthen their presence in the market and maintain them. in the minds of consumers.

When it comes to small business loans, credit unions still have a leg up compared to their big banks. And, with fintechs emerging as new leaders in the lending market, credit unions can resign themselves to the belief that they can’t compete with the resources and reach of these lenders.

However, credit unions have yet to take advantage of this opportunity. Banks and credit unions may have some similarities, but they have many differences that give credit unions an edge and make them a better way for small businesses looking to raise money. .

A report by the Small Business Association indicated that more than 99% of all businesses in the US are small businesses. They create 66% of new jobs and contribute 43% of gross domestic product (GDP). However, two-thirds of these investors feel ignored, misunderstood and unappreciated by their previous bank.

According to the latest market data, small business demand for financing continues to be strong, with market demand for credit products increasing by nearly 60% year-on-year and this year. Most of the growth in demand is in the line of unsecured credit products, which comprise 50% of the total market.

Small businesses are asking for more than they can get from their borrowers, who are using more caution due to the unstable economic conditions. Approval rates for all but the unsecured loan product appear to be good to chance at 37%; but, as of October 2022, the amount of guaranteed loans has dropped $70,000 from last year. If the cycle for unsecured loans remains the same, the 75% increase in secured products from 35.8 calendar days needed to book a loan to 62.3 days .

Forced to contend with the impact of inflation, supply disruptions, labor shortages and reduced consumer spending, small businesses hope has dwindled. With the increase in the cost of supplies, goods and services, 51% report increased spending in the past months to maintain, improve, acquire and repair capital assets such as machinery, vehicles and buildings.

For credit unions, there is a great opportunity to serve the needs of existing small business owners and entrepreneurs. Like banks and other lenders, credit unions offer many different business loan options. But, unlike their competitors, these non-profit organizations do not need to pay state and federal taxes, allowing them to provide more value to their members through reduced fees on business accounts, paying higher dividends on savings accounts and offers. competitive interest rates on loans to their members, often beating the rates offered by banks and online lenders.

Because credit unions are small, community-based financial institutions, which also have technical data holders, are there is a strong emphasis on putting people’s needs first. This means that banking with a credit union is more of a relationship than a business transaction – a relationship that can be developed over time as it grows. business needs.

Business loans can be difficult for any business to obtain, but credit unions are uniquely positioned to use local market knowledge to effectively evaluate small businesses based on their size, growth rate and type of organization. rather than using a one-size-fits-all approach. many applicants are considered dangerous.

Not only do small businesses continue to drive the economy, with business priorities continuing to remain in health care, professional services and construction, but they also reflect the diversity of the population of America. Women own 36% of small businesses, seniors own 9% and people of color own 14.6%. This includes 2.3 million Latino entrepreneurs, 1.9 million black entrepreneurs and 1.6 million Asian entrepreneurs.

Credit unions have always played an important role in communities, supporting the population, informal businesses, and people who may not have access to loans and other financial services. money. Relationship banking is a powerful way to build strong, ongoing relationships with small business owners to better understand the business environment in the communities they serve.

No other financial institution is better equipped to help the local economy grow and prosper by working with small businesses than unions. Debt. For small business owners who value community, affordability and long-term investment, the appeal of an organization advocating for their financial well-being is certainly more than a long arm. .

Lindsay Burkhalter Lindsay Burkhalter

Lindsay Burkhalter is the Director of Consumer & Small Business Lending at Curinos, a New York, NY-based global business intelligence firm that serves financial institutions worldwide with lending , savings and digital solutions.

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