5 Major Advantages of Credit Unions for Small Businesses

As a small business owner myself, I understand how daunting it can be to choose where to do your banking. Large national banks might seem like the obvious choice with their ubiquitous ATM networks and familiar names. However, I‘ve found that credit unions offer significant advantages tailored to the needs of small business owners.

In my experience as an entrepreneurship consultant helping small businesses get started and grow, I always recommend that clients consider partnering with a credit union over a traditional bank. Here are five major benefits that set credit unions apart:

1. Lower Fees Save Thousands

Opening and maintaining a small business account at a big bank can get very expensive, very quickly. A 2016 survey by Bancography showed that major banks charge an average of $144 per month in account fees for small business checking. Many also charge for every transaction over a low monthly limit.

Comparatively, credit unions provided small business checking with an average monthly fee of just $29 according to the same survey. My own business has saved thousands per year by avoiding the tedious fees charged by major banks. As member-owned nonprofits focused on service rather than profits, credit unions don‘t nickel and dime small businesses.

2. Local Mission Drives Community Investment

In my experience advising community businesses, I’ve seen that credit unions are often more invested in the areas they serve than big banks with centralized management and shareholder responsibilities. As Jim Nussle of the Credit Union National Association said:

"Credit unions exist to serve their members, not make a profit. This different approach causes credit unions to invest in their local communities."

With decision-making power concentrated at the local level, credit unions can get to know small businesses personally and offer targeted assistance. Their nonprofit mission focuses on community impact rather than profit margins.

3. Better Rates and Terms on Loans

As one example of how credit unions invest in their communities, small business owners will typically have access to loans and lines of credit with lower rates and more favorable terms at a credit union compared to banks.

A 2022 study by S&P Global found that credit union loan rates for small businesses averaged 5.7%, compared to 6.1% at small banks and 6.8% at large banks. That can translate into tens of thousands of dollars in interest savings over the life of a loan.

4. Customized Products and Hands-On Service

In contrast to the rigid corporate structures of major banks, credit unions focus on tailoring products and services to each member‘s needs. As NAFCU notes:

"Credit unions can provide more personalized service and offer specially-designed loan programs."

Rather than one-size-fits all, you‘ll work directly with a dedicated business banker who takes the time to understand your business goals and cash flow needs. This high-touch approach provides flexibility as your business grows and changes.

5. Democratic Governance in Your Interests

Banks answer to outside shareholders, while credit unions are governed democratically by members. This means every account holder has an equal say in electing the board of directors, regardless of account balances.

Leadership focuses on benefiting members rather than maximizing quarterly profits. Your voice will be heard, not dwarfed by executive bonuses and shareholder returns.

As a fellow small business owner, I highly recommend considering local credit unions for your banking needs. Take the time to meet with a credit union business banker and see if their offerings and approach are a good fit. With lower fees, better rates, customized services, and local governance, credit unions provide compelling advantages that help small businesses thrive.