What do you think of when you hear credit union? Some of you may think of 1960, grandparents or limited, closed-associations. Some of you may even be asking whether credit unions even exist anymore. During the early-May THINK 16 conference, Max Schorr, co-founder of GOOD, compared credit unions to the DMV, with antiquated technology and inefficient processes, at least from a perception standpoint.
Perception is definitely not reality in this case and, in fact, credit unions may be one of the best-kept secrets for financing your start up. According to Samantha Paxson, Chief Marketing Officer for conference sponsor CO-OP Financial Services, credit unions were created as community-focused financial institutions and remain committed to that vision today. Credit unions were, and are, far ahead of their time when it comes to social responsibility.
As Paxson explains, "Credit unions are financial institutions owned and governed by members as a cooperative. All account holders are members, with collective total assets used for financial purposes. Credit unions are not-for-profit entities, meaning that their purpose is to serve the best interests of members rather than maximize profit margins.
"Just as bank deposits are FDIC-insured, credit union accounts are given the same protection under the National Credit Union Administration (NCUA). In fact, consumers tend to feel safer with credit union deposits compared to banks (85% to 68%; source: FILENE). Simply look for the NCUA logo on a credit union's materials, and you'll know your deposits are insured," Paxson said.
What does this mean for you as an entrepreneur?
This means you have a viable financial resource for your organization. Since credit unions are for the people instead of for profit, they often offer the lowest loan rates and fees. A recent survey found credit unions offering a nearly 2% lower rate than banks.
It may very well be that Apple exists today because Steve Wozniak was able to get a loan from his own credit union while the company was still based in a garage.
In addition to lower fees, a loan from a credit union allows you full control over your business decisions, which is certainly not always the case if you receive funding from a venture capital firm or incubator. Many times the venture capital firm or incubator has a say in how you operate and/or may require you to give them a stake in your company.
Working with a credit union, you are more than just a customer. You are a member. You can expect to be treated with superior customer service and may even receive counsel on financial decisions.
One possible drawback of a credit union can be eligibility requirements; which can be based on residence or workplace. However, virtually anyone can qualify to join one credit union or another. To find a credit union that is right for you, go to http://www.asmarterchoice.org.
Lower rates and superior customer service are just part of the story of credit unions. CO-OP Financial Services, which counts 3,500 credit unions among its clients, drives collaboration and efficiencies with 30,000 linked, surcharge-free ATMs (more than any bank) and provides technological innovations such as mobile, online and virtual payment services.
About that social responsibility? Social good is part of the credit union's DNA, and includes local fundraising initiatives to support Children's Miracle Network Hospitals and greater financial literacy in their communities.
Now, what do you think of when you hear credit union?