Is a credit union right for you.

If you are an established business, you probably need the services that a commercial bank can provide. If you are just starting out, or if you find the banks are just not lending, then credit unions may be an option to consider.

The reason is simple. Credit unions were set up to provide credit (loans) to their members. They tend to be much easier to get a loan from than regular banks.

The drawback is that usually you cannot run your business from a credit union account. You may in some cases be able to open an account in a business name, but that is not common. They are simply set up for individuals.

You also cannot normally get a business loan from a credit union. What you can get is a signature loan, or a second mortgage on your home, or a loan secured by one of your vehicles. Of course, once you have the money you can use it as you wish. You need to understand that if you pledge personal collateral, that is what is in jeopardy if you don't pay on time.

You won't get a $350,000 loan at a credit union, but for a start-up loan they may be just right. About a third of all businesses are begun with less than $10,000--well in the range of possibility.

Interest rates on loans at credit unions tend to be lower than at commercial banks, just as interest paid on savings tends to be slightly higher.

Credit Union Membership

Credit unions have a charter that clearly specifies who is eligible to be a member. Some credit union charters are very specific. One of the largest, Navy Federal Credit Union, is open only to military members who join outside of the United States. Others have a very broad charter. One may have an education-based charter, with membership open to teachers, students, graduates, or relatives of teachers, students or graduates. That can be a very broad charter indeed.

Washington Credit Union is open to most residents of Washington State! Credit union membership may be offered to your employees, and that can be a valuable employee benefit.

Credit Union Services

Credit unions offer many of the services one thinks of as banking functions. You can deposit money (they call it buying shares) which can be withdrawn at will. You can establish a checking program. They often have drive-up windows, offer credit cards, and have access to ATMs nationwide through Plus, Cirrus, or other programs. Credit unions also usually offer credit counseling services, and they can prove very valuable if you or one of your employees starts getting into a credit bind. They can set up repayment schedules, contact creditors, and help you dig out of the hole.

Lee Mellit is a freelance Business writer based in Westlake Village.