When you practice the credit union motto of "people helping people," your day doesn't end at 5 p.m.
I spend most of my evenings speaking with small business owners, in a socially distanced environment, advising them on different strategies to help them continue to meet payroll and handle other operational expenses amid the COVID-19 pandemic.
There is no guarantee that even with excellent personal credit a small business will be able to secure the funding they need. There are, however, a variety of avenues a small business can pursue for funding and a local credit union can be a key resource.
Northwest Community Credit Union recently partnered with the Small Business Administration (SBA) to provide Paycheck Protection Program (PPP) loans to small businesses to keep employees on the payroll. We are also working closely with members of the Chamber of Commerce to refine the process of applying for these loans, many of which are forgivable through the SBA.
In addition to the PPP loan, there are other products to consider:
7(a) Loan Program
The SBA's most common loan program, the 7(a) includes financial help for small businesses with special requirements. While this loan is the best option when real estate is part of the business purchase, it can also be used for:
• Short and long-term working capital;
• Refinance of current business debt; and
• Purchase of furniture, fixtures, and supplies.
CDC/504 Loan Program
This program provides long-term, fixed-rate financing of up to $5 million for major fixed assets that promote business growth and job creation.
The 504 loans are available through Certified Development Companies (CDCs) and SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.
Other SBA loan programs include microloans and disaster assistance programs. Visit SBA.gov for additional information and a program that may meet your small business needs.
In addition to SBA financing, many credit unions offer term loans, commercial real estate loans and revolving lines of credit.
Being a small business has some inherent challenges when looking for a loan.
• Small business loans don't typically have the lowest interest rates.
• If you've been in business for less than two years, you will have a more difficult time qualifying for a big loan with a low interest rate.
• If your credit isn't the best, you might have to put up some collateral and get a secured loan.
When applying for any kind of loan, there are a few factors small business owners must consider when assessing their personal finances.
In addition to your credit report, you'll need further proof that you will be able to repay the loan. Make sure all the documents for your business are organized and prepared for the loan officer. These documents include proof of EIN, Articles of Incorporation and financial statements. Lastly, before signing on the dotted line, compare various loan offers.
Luckily, there is no monopoly on loans. You can choose from the options that are most suitable for your business.
As a credit union lender, the pandemic opened my eyes to the needs of small businesses. The challenges of tomorrow will be daunting, but with the right relationship you can keep your cost of financing down and prosper as a business. There are many options to finance. Be smart, know your financial strength and open your eyes to a credit union.
• Jose Garcia is president and CEO of Northwest Community Credit Union.