How Credit Unions Are Empowering Small Businesses and Entrepreneurs
The rising number of millennials embarking on entrepreneurial and small business endeavours means there’s a strong need for capital. While the average small business owner in Canada spends between $5,000 and $10,000 to initially start their business, securing a small business loan with insufficient sales and cash flow can be challenging.
Beyond the traditional ‘big 5’ banks, another financing source to consider is credit unions. Whether a person is looking for chequing and savings accounts, mortgages, business loans or investment advice—credit unions offer many of the same products and services as conventional banks, with some unique benefits.
Credit unions are highly-regulated financial institutions, similar to banks, except they’re owned by their members. Credit unions are financial cooperatives which means they follow the seven cooperative principles and one of their primary objectives is to serve their members with the right products and services.
Credit unions operate under the model of “one member, one vote”. As a result, members have a say in how the credit union is run by democratically voting for its board of directors.
Canada’s 223 credit unions are successfully helping business owners and communities. In fact, they are responsible for 11.9 percent of lending to small and medium-sized businesses, an amount comparable to larger financial institutions.
Entrepreneurs and small business owners seeking loans can trust in the local expertise of credit unions. Oftentimes, they can help make the loan approval process more efficient, in contrast to larger financial institutions with centralized loan departments. The greater flexibility offered by credit unions can lead to quicker and personalized loan decision-making.
Credit unions tend to review a person’s or company’s whole financial history instead of only current circumstances, which could increase the likelihood of obtaining a loan. Ultimately, this allows more entrepreneurs an opportunity to secure the financing they need to get their idea off the ground.
Notably, the 2021 Ipsos Financial Service Excellence Awards ranked Canada’s credit unions as the top financial institution for outstanding customer service—an award they have won seventeen consecutive years. According to the Canadian Federation of Independent Business (CFIB) March 2020 Report Card, credit unions have a better reputation for customer satisfaction than some of the ‘big 5’ banks, particularly in the realms of account management and fees.
To help their members increase their financial literacy, credit unions offer a number of great programs such as the Each One Teach One initiative. This can give entrepreneurs and small business owners more foundational knowledge to better run their business and help it become a success.
Credit unions are making an impact in the community, by playing an important role in the economic, social, and environmental landscape. To highlight this impact in Ontario, Your Neighbourhood Credit Union is supporting other local businesses by creating an online marketplace called Shop Your Neighbourhood. The e-commerce site showcases over 1,000 local stores for customers to discover. Meanwhile, in British Columbia, Northern Savings Credit Union did its part in helping local restaurants during the pandemic by launching a Facebook initiative—Take-Out Tuesday to give contest participants a chance to win gift cards to their favourite local restaurants.
On a larger scale, in 2020, Canada’s credit unions gave back an estimated 4.3 percent of their pre-tax profits through community donations and sponsorships and $191.2 million to their members through dividends and patronage.
For entrepreneurs and small business owners in need of a loan to bring their business dreams to life, there are several reasons why credit unions may be a socially conscious and strategic financial partner.