Are these nonprofit lenders right for your small business?
These are typically small operations with a limited capacity to serve and fund. Membership is often limited to a few states, and many don’t even serve businesses. Those that do often only offer financing up to $50,000 and require a lengthy application.
But if you’re looking to save, don’t need money right away or just need a small amount, a credit union could be a right fit.
Top 6 credit union business loans
| Name | APR | Loan amount | Terms | Apply |
|---|---|---|---|---|
| Navy Federal Credit Union | 11% to 18% | $2,500 to $100,000 | Up to 5 years | Read more |
| America First Credit Union | Up to 18% | Up to $15,000 | Up to 5 years | Read more |
| Lake Michigan Credit Union | 11% to 18% | $2,500 to $100,000 | Up to 5 years | Read more |
| Northwest Federal Credit Union | Up to 18% | Up to $50,000 | Varies | Read more |
| Sound Credit Union | 6.15% to 10.15% | $500 to $25,000 | Up to 6 years | Read more |
| Boeing Employees’ Credit Union | 4.89% to 12.69% | $10,000 to $250,000 | Up to 7 years | Read more |
Best for veterans: Navy Federal Credit Union
Navy Federal Credit Union is a nationwide credit union that serves current and former members of the US armed forces, as well as their families and Department of Defense employees. It’s also one of the largest credit unions out there that works with small businesses.
It offers a wide range of financing, including secured and unsecured business loans. Its personalized service is what sets it apart, though its application is a little complicated — even for a credit union. It’s also vague about its eligibility requirements.
Best for a straightforward application: America First Credit Union
This Salt Lake City-based lender has one of the faster turnaround times for a credit union. It only takes between 24 and 48 hours to get approved after submitting your application. There’s no minimum for its unsecured term loans, making it a good option for business owners with small projects on their plates. And it offers several other types of business financing on top of its term loans, including unsecured lines of credit and Small Business Administration (SBA) loans.
However, America First only serves businesses in four states: Utah, Nevada, Arizona and Idaho. And while its rates are low compared to other business loans in general, you might be able to find a better deal with another credit union.
Best for competitive rates: Lake Michigan Credit Union
Lake Michigan Credit Union might only have locations in Michigan and Florida, but its business loans are available nationwide. It offers secured term loans with rates that max out at 7% — several points below where APRs start at other credit unions.
Low rates don’t just go to anyone, however. Business owners need to have good credit and enough collateral to back the amount you want to borrow. And Lake Michigan only works with established businesses, so startups should look elsewhere.
Best for startups and big projects: Northwest Federal Credit Union
Northwest Federal Credit Union is one of the few credit unions out there willing to work with startups. It’s available to business owners and entrepreneurs in all 50 states and has no minimum requirements for revenue or time in business. It also has no maximum amount your business can borrow, making it a good choice for business owners who need more than $50,000 in funds.
As with most startup-friendly loans, eligibility often comes down to the business owner’s credit score: Northwest FCU only accepts scores of 680 or higher. Just make the cutoff? You might be able to improve your chances of getting a good deal by securing your loan with collateral.
Best for small-dollar loans: Sound Credit Union
Finding a good rate on a business loan under $5,000 isn’t easy — many come with APRs in the triple digits. Sound Credit Union is an exception. With loans starting as low as $500 and APRs ranging from 6.15% to 10.15%, this lender might offer one of the most competitive deals out there.
The downside: It’s only available in Washington State. Businesses also must be up and running for two years to qualify, and owners need a credit score of at least 700.
Best for secured loans: Boeing Employees’ Credit Union
If you’re looking to get a better deal on a loan by backing it with collateral, Boeing Employees’ Credit Union (BECU) might be for you. It offers a wide range of secured financing, from $10,000 to $250,000, with competitive rates and no fees. Don’t have enough collateral yet? Businesses can also apply for unsecured lines of credit and vehicle loans with similarly favorable rates and terms.
However, BECU business loans are generally only available to businesses in Washington State and select cities in Oregon and Idaho. It also has an application that rivals that of SBA loans when it comes to the long list of documents and information business owners need to provide. If you choose to go with this lender, buckle up for the long haul.
How do credit union business loans differ from other business loans?
The main difference between credit union business loans and other types of business financing is the application process. Credit unions require all businesses to become members either before or during the application process, which typically involves opening a business checking or savings account. Membership is often limited to a few states or industries and can sometimes be more difficult to qualify for than the loan itself.
Another factor that sets credit unions apart is the cost. Because they’re nonprofit lenders, credit unions can often offer more competitive rates and terms than you might find elsewhere. In fact, the National Credit Union Administration doesn’t allow federal credit unions to charge interest above 18% on any loan products, including business loans. Many credit union business loans also don’t have any application or origination fees, which come standard with most other types of business financing.
But they’re not without some downsides. Credit unions are notorious for being mismanaged, and getting a business loan can take a lot of time. They often don’t invest as much in technology or customer service as other lenders, and many don’t even have an online application. And since they’re such small operations, credit unions usually don’t have the reserves to fund large projects.
Benefits of getting a business loan from a credit union
- Highly competitive rates. Federal credit unions legally can’t charge more than 18% interest on their loans, and many others charge even less.
- Fewer fees. Credit unions often charge fewer origination and application fees than banks or online lenders. Some don’t even charge late or prepayment penalties.
- Affordable small-dollar financing. Looking for a loan under $5,000 without astronomical rates? A credit union could be your best bet.
- Membership perks. Many credit unions offer workshops and other free resources for members that could help you better run your small business.
- Faster than a bank. While many credit unions probably can’t get your business next-day financing, they typically have a faster turnaround time than borrowing from a bank.
- Supporting your community. Most credit unions are local organizations that serve the community around you. Borrowing from one is an easy way to give back and empower others to do the same.
Are there any drawbacks?
- Low-tech institutions. Credit unions often don’t invest much in their websites or other technology, making for slow applications and glitchy apps.
- Hard to qualify. Many credit unions only work with businesses that have been around for a couple of years and business owners with good to excellent credit.
- Large amounts hard to come by. Many credit unions just don’t have the resources to fund projects over $50,000.
- Complicated applications. If you’re not already a member, your business typically has to fill out two applications to apply for financing: one for membership and one for the loan. And these can be highly detailed.
- Poor customer service. One of the top customer complaints against credit unions is the quality of customer service. It can often be hard to get in touch with a representative or correct a mistake.
Compare online business loans you can apply for today
How to get a business loan from a credit union
Ready to get financing through a credit union? Follow these steps to compare lenders and find a loan that fits your business’s needs.
- Know what you’re looking for. How much money does your business need to borrow? Do you want to back your loan with collateral? Are you willing to pay a little extra to save time on the application? Knowing your priorities before you start your research can help you make a faster comparison.
- Do your research. Try to find a credit union that serves businesses in your area that matches your criteria. Since credit unions are often regional, your options are likely very different from what’s available to a business across the country.
- Stop by or give them a call. There’s a high chance you won’t be able to find all of the information you need on the credit union’s website. Calling customer service or stopping by a local branch might be the only way to find out if your business is eligible for membership and financing.
- Become a member. While many credit unions allow you to submit your membership and business loan application at the same time, some may ask you to become a member first.
- Gather your documents. Once you’ve settled on a credit union, having all of the documents and information you need on hand can seriously speed up the application process.
- Complete and submit the application. How the application actually works varies between credit unions. Some have a quick online form, while others might ask you to set up an appointment to apply in person.
- Review and sign your offer. The turnaround time at credit unions is typically faster than a bank, but slower than an online lender. Once you get your offer, read it carefully to make sure it’s the right fit for your business before signing any loan documents.
How do I join a credit union?
The process of becoming a business member differs between credit unions. Some require business owners to become individual members to open a business account. Others have separate, business-specific requirements that might be limited by location or industry.
Many credit unions don’t mention how business membership works on their websites, so you might need to call or visit your local branch to learn more. Generally, becoming a member involves opening up some kind of business account and depositing around $25. You can often apply to become a member along with your loan, though some credit unions require businesses to join first.
Bottom line
Credit union business loans are a good fit for established businesses looking for loans under $50,000 with competitive rates. However, they’re not ideal if you need money fast or want to fund a large project.
To learn about your other business financing options, check out our comprehensive guide to business loans.
