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If you’re starting a business and need financing to get your venture running, credit unions are an excellent option for getting a business loan. Credit union business loans may be easier to qualify for than other types of loans. Before you select a credit union for a business loan, consider choosing one that meets your business’s borrowing needs by understanding common eligibility criteria, application requirements and loan features.
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7 Steps To Get a Business Loan From a Credit Union
Follow these steps to get a business loan from a credit union.
1. Determine Your Financing Needs
Before applying for a business loan from a credit union, determine your financing needs. Doing this first can help you decide how much you need to borrow, calculate how much you can afford in monthly payments and, ultimately, ensure you request the appropriate amount.
Start by creating a detailed business plan outlining your projected expenses and income. Alternatively, review your business’s existing business plan and financial records to identify your cash flow needs and determine how much financing you require to cover any gaps. Also, consider your preferred loan repayment period, as this will impact monthly payments and the overall cost of borrowing.
2. Check Your Eligibility
Evaluating your eligibility before applying for a loan with a credit union can help increase your approval odds. While your credit score plays a significant role in loan approval, it’s not the only factor lenders consider—especially with small business loans.
These are some of the common eligibility criteria lenders require:
- Credit score. Credit unions typically require a personal credit score of at least 680 to qualify for a business loan, but this requirement may be as low as 580. Requirements vary by financial institution, so check each lender’s credit score thresholds to evaluate your approval odds.
- Time in business. Most credit unions require a minimum of one to two years in business to qualify for a loan. However, some may be willing to consider newer companies if they have valid evidence of financial stability.
- Annual revenue. Different credit unions may require different levels of annual revenue. Generally, your business should have at least $100,000 to $250,000 in annual revenue to qualify for financing.
- Collateral. Depending on the loan amount, many credit unions require collateral to secure their funds. Collateral could be a real estate deed, a vehicle title or other valuable assets within your ownership. If you intend to take out a large business loan, evaluate your available collateral before applying.
Speak with a credit union representative to learn about specific lending requirements. Be prepared to provide detailed information about your business to get the most accurate assessment of your approval odds.
3. Research and Choose the Right Credit Union
Once you determine your financing needs and check your eligibility, research available credit unions to find the right one. Then, compare the financial institutions and consider these factors:
- Available loan amounts. Credit unions offer a variety of business loan types and amounts. Consider the minimum and maximum loan amount offered to ensure the credit union can finance your specific needs.
- Repayment terms. Most credit unions offer repayment periods from one to five years, depending on the type of loan. Check each potential lender’s flexibility to confirm you can repay the loan in a way that works for your budget.
- Interest rates. Interest rates vary at each financial institution, so compare multiple lenders before deciding. Many credit unions also offer promotional interest rates and special discounts on certain loans, so ask about these options.
- Additional fees. Most business loans come with additional costs, such as origination fees and closing costs. Evaluate the total cost of borrowing before committing to a loan.
- Customer service. Credit unions may offer a variety of customer service touchpoints, such as online banking and in-person branches. Consider the convenience of each lender’s services based on your needs.
- Reputation. Read online reviews and speak with other business owners to learn about their experiences with potential lenders. If you already have a relationship with a credit union, consider its business loan options first.
4. Gather Required Documents
The documents needed to apply and qualify for a business loan also vary by credit union. However, there are several documents that most financial institutions require. Organize these materials before applying to expedite the application process and ensure you can answer questions from your loan broker:
- Business plan. Your business plan is the foundation of your loan application. It should include an executive summary, market analysis, marketing strategy, financial projections and management team.
- Financial statements. Provide copies of your balance sheet, income statement and cash flow statement for the last two to three years.
- Tax returns. Gather your business’s federal and state tax returns for the last two to three years.
- Bank statements. Collect your business’s recent bank statements to provide evidence of cash flow and assets.
- Identification documents. Be prepared to provide copies of your driver’s license and other forms of ID, such as a passport or Social Security card.
- Cash flow projections. Create a detailed cash flow projection for the next year that outlines your expected income and expenses.
- Profit and loss statement. Provide a profit and loss statement for the last three years that includes your income, expenses and profits.
5. Become a Member of the Credit Union
To become a credit union member, you typically need to meet certain eligibility requirements, such as living in a certain geographic area or working for a specific employer. Once you determine your eligibility, fill out an application and meet any additional requirements such as depositing a small amount into a checking or savings account.
6. Submit Your Application
Next, prepare and submit your loan application. Loan officers at credit unions usually review applications within one to two weeks, but the process can take longer due to processing times or other factors.
7. Await Loan Approval and Closing
After submitting your application, a loan officer will review it and determine whether or not you qualify for financing. Depending on your financial situation and the strength of your application, you may need to provide additional documentation or even collateral to secure a loan. Respond to requests from your loan officer quickly to keep the underwriting process on schedule. Once everything is finalized, funds are typically available within five to seven business days.
Credit Union vs. Traditional Bank
Credit unions and traditional banks share many similarities, but there are a few key differences between banks versus credit unions. Banks are privately owned or publicly traded for-profit institutions. In contrast, credit unions are nonprofit institutions owned and operated by their members—often resulting in different services than those offered by banks.
Credit unions also tend to have more flexible eligibility requirements, lower interest rates, fewer fees and better customer service. That said, traditional banks often offer a wider range of financial products and services and have more physical branches for those who prefer in-person borrowing. Likewise, a traditional bank may be better if you want access to more advanced technology and tools like mobile banking and account management.
Pros and Cons of Credit Union Business Loans
When obtaining funding for your business, it’s important to weigh the pros and cons of credit unions and traditional banks before deciding.
Pros of Credit Union Business Loans
- Lower interest rates than traditional banks and online lenders
- Fewer fees
- Better customer service, including additional services like financial planning
- Flexible eligibility requirements
- Member ownership and a say in how the institution is managed
Cons of Credit Union Business Loans
- Limited lending capacity for larger loans
- Borrowers must meet membership eligibility requirements
- May have fewer branches and ATMs available than traditional banks
- Limited number of products
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FAQs
How To Get A Business Loan From A Credit Union? ›
What credit score do you need to get a loan from a credit union? Generally, you'll want a credit score of at least 640 to qualify for a loan, but the credit score requirement will vary by lender. You can check your credit score for free through LendingTree's platform.
What should your credit score be to get a loan from a credit union? ›What credit score do you need to get a loan from a credit union? Generally, you'll want a credit score of at least 640 to qualify for a loan, but the credit score requirement will vary by lender. You can check your credit score for free through LendingTree's platform.
How does a bank decide to give you a business loan? ›Banks generally require that you have good to excellent credit (score of 690 or higher), strong finances and at least two years in business to qualify for a loan. They'll likely require collateral and a personal guarantee as well.
How to convince a bank to give you a business loan? ›- First, Build a Real Relationship. It is very difficult for any small business owner to walk up to someone to ask for assistance. ...
- Know the Numbers. ...
- Explain How You Made Your Forecasts. ...
- Show How They Get Their Money Back. ...
- Personally Guarantee the Loan.
Credit unions typically offer lower fees, higher savings rates, and a more personalized approach to customer service for their members. In addition, credit unions may offer lower interest rates on loans. It may also be easier to obtain a loan with a credit union than a larger bank.
Why would a credit union deny a loan? ›The most common reasons for rejection include a low credit score or bad credit history, a high debt-to-income ratio, unstable employment history, too low of income for the desired loan amount, or missing important information or paperwork within your application.
Can you get a loan with a 500 credit score? ›You can get a personal loan with a credit score of 500 if you have a steady source of income, but your choices are very limited. The best way to get a personal loan with a 500 credit score is to start by checking to see if you pre-qualify for loans from major lenders.
What do banks look at when approving business loans? ›Lenders will want to review both the credit history of your business (if the business is not a startup) and, because a personal guarantee is often required for a small business loan, your personal credit history. We recommend obtaining a credit report on yourself and your business before you apply for credit.
How much of a business loan will a bank give me? ›How much of a business loan you can get depends on your business's annual gross sales, creditworthiness, current debts, the type of financing, and the chosen lender. In general, lenders will only provide loans up to 10% to 30% of your annual revenue to ensure you have the means for repayment.
What do you say when asking for a loan? ›- How you plan to use the money.
- The amount of money you are requesting.
- Your desired loan terms.
- How you plan to pay back your loan.
- And collateral to be used.
How can I increase my chances of getting a business loan? ›
- 1 – Get your credit score in check. ...
- 2 – Don't get multiple quotes from multiple lenders. ...
- 3 – Reduce negative balance days. ...
- 4 – Choose the right lender. ...
- 5 – Create a perfectly written business plan. ...
- 6 – Be open to alternative funding options.
Step 3: Funding
The typical business loan from a bank or credit union can take weeks or months to process. Fast business loans, on the other hand, may be funded within a week of submitting an application. Some lenders are able to assess and underwrite loans in a matter of hours and fund them within a day.
Poor credit history and low cash flow can prevent small businesses from securing loans. Before applying for a business loan, make sure your financial documents are in order and that you understand what lenders need from you.
What is the easiest credit union to get approved for? ›- Affinity Plus Federal Credit Union. Affinity Plus Federal Credit Union Superior Money Market Account. ...
- Alliant Credit Union. Alliant High-Interest Checking Account. ...
- Bethpage Federal Credit Union. Bethpage Federal Credit Union Certificate Account. ...
- Blue Federal Credit Union.
- Membership required. Credit unions require their customers to be members. ...
- Not the best rates. ...
- Limited accessibility. ...
- May offer fewer products and services.
Even with relatively generous lending standards, a credit union may still turn down your loan application. If that happens, you still have some other borrowing options, and the approach that might do you the best could be pursuing a debt consolidation loan—borrowing funds to pay off your existing debt.
Can a credit union reject you? ›Yes. There are a number of reasons why a bank or credit union may refuse to open a checking account. For example: A history of writing bad checks.
Do credit unions check your credit score? ›Banks and credit unions don't perform a credit check when opening an account, but they will sometimes run your ChexSystems report. A ChexSystems report is like a credit report for banks, displaying previous banking problems such as negative balances, frequent overdraft fees, bounced checks, and fraud.
What is the easiest loan to get? ›The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.
Can I get a 50K loan with a 650 credit score? ›For a loan of 50K, lenders usually want the borrower to have a minimum credit score of 650 but will sometimes consider a credit score of 600 or a bit lower. For a loan of 50K or more, a poor credit score is anything below 600 and you might find it difficult to get an unsecured personal loan.
What is the lowest credit score to borrow? ›
Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 690.
Do banks give money to startups? ›Collateral
As I explained above, banks do lend money to startups. One exception to the rule is that the federal Small Business Administration (SBA) has programs that guarantee some portion of startup costs for new businesses so banks can lend them money with the government, reducing the banks' risk.
Are you applying for a business loan? Commercial lenders may look at both your business and personal credit scores before they approve your application. If you have poor personal credit and you're wondering if it will affect your approval or the terms of your commercial loan, the answer is yes, it can.
How long does it take a bank to approve a small business loan? ›Expect to wait between two and three months for loan approval. The exception is an SBA Express loan. With this type of 7(a) loan, you should hear back about your application within 36 hours. Receiving your funds after approval may take several weeks.
How hard is it to get small business loan? ›According to the Biz2Credit Small Business Lending Index, small business loans had a 13.5 percent approval rate from big banks as of April 2023. Small banks and alternative lenders approved more small business loans, with approval rates of 18.7 percent and 28.7 percent, respectively.
How much should I ask for in a business loan? ›When getting a business loan, my advice is to always try to apply for 10-20 percent more than the company really needs if you can qualify for the higher amount. Many times expenses are either more than anticipated or revenue takes longer to generate than expected.
How much money do you need to make to get a business loan? ›| Loan type | Annual revenue required |
|---|---|
| Commercial real estate loan | At least $50,000 annually |
| SBA loan | Varies by lender and loan type but must demonstrate an ability to pay back the loan |
| Term loan | At least $100,000 |
| Lines of credit | At least $36,000 |
- Be Honest And Open. It is crucial you're being honest about why you need the money. ...
- Have A Plan In Place. Coming up with a plan of attack to solve your financial situation is an essential item on your to-do list. ...
- Put It In Writing.
The most common reasons to get a personal loan include emergency expenses, major purchases, home repairs, or milestones. A personal loan may be the right option if you have a good credit score, and your costs fall under these categories.
How much does a small business loan go up to? ›Typically, you can borrow between 80% and 100% of the value of the equipment or vehicles you're purchasing — usually up to $500,000 with a bank or online lender. You can often get more if you apply for an SBA loan.
Do most people take out loans to start a business? ›
Data from the U.S. Census Bureau found that 64% of entrepreneurs use their personal savings and money from their families to start a business, while 16.5% take out a business loan.
How long after getting a business loan do you have to pay it back? ›If you take out a small business term loan, you'll get a lump sum of capital that you'll pay back at a fixed interest rate with regular repayment terms. In most cases, these types of loans are repaid in five years and used to fund a specific investment for a small business.
How many months is a typical business loan? ›| Loan type | Repayment terms | Loan amounts |
|---|---|---|
| Term loans | Three months to 10 years | $5,000 to $1 million+ |
| SBA loans | Up to 25 years | Up to $5 million |
| Traditional bank loans | Three to 10 years | $250,000 to $1 million |
| Business lines of credit | Six months to five years | $1,000 to $250,000 |
Your business can get an SBA 7(a) loan for any amount of up to $5 million. The loan has no minimum, which is good news for small businesses.
How many small business loans are denied? ›20% of small business loans are denied due to credit issues.
It's important to note that your business's credit isn't necessarily your personal credit, so you should watch both.
Commonly offered by banks, business loans offer a much-needed infusion of cash to help cover most costs, though many small business owners find it hard to be approved.
What is the most common reason banks give for rejecting small business loan applications? ›The most common reason banks and other lenders reject business loans is inadequate collateral or insufficient cash flow. Collateral is any type of asset that can be used to secure a loan, like real estate, business equipment, or inventory.
What credit scores do credit unions require? ›Different credit unions may have different ranges of what scores they consider to be good. Generally, a good credit score is above 640 or 660. If your credit score isn't very high, and you don't need a new car right away, you may want to take some time to try to improve it before applying for a car loan.
What credit score do you need to borrow money from a credit union? ›Your local credit union should be one of your first stops when you're looking to borrow money, especially if you have a fair or bad credit score (689 or lower). Credit union personal loans often have benefits over those of other lenders, including: Typically lower interest rates.
What is safer a bank or credit union? ›Why are credit unions safer than banks? Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks. The National Credit Union Administration is a US government agency that regulates and supervises credit unions.
Are credit unions really better than banks? ›
Why Choose a Credit Union? Lower interest rates on loans and credit cards; higher rates of return on CDs and savings accounts. Since credit unions are non-profits and have lower overhead costs than banks, we are able to pass on cost savings to consumers through competitively priced loan and deposit products.
What are the biggest risks facing credit unions? ›Credit unions face external risk factors, including natural disasters, exchange rates, cybercrime, interest rates, and loss of funds due to theft. Credit unions also face such internal risks as internal fraud, regulatory non-compliance, data breaches, legal risks, and liability for injuries to consumers and staff.
Who has the biggest credit union? ›The largest credit union in the U.S. is Navy Federal Credit Union, with $156.65 billion in assets. As of 2022, the U.S. credit union industry has a market size of $103.3 billion.
What do banks do better than credit unions? ›More financial products and services: Banks offer a variety of products and services, while credit unions tend to stick with a few core offerings, such as deposit accounts, credit cards and loans. Many banks provide investment accounts and financial advisory services in addition to standard banking products.
Do credit unions improve credit? ›Does joining a credit union build credit? Joining a credit union can help build credit, provided you follow the right steps. For example, if you join a credit union with bad credit, you may want to consider getting a secured credit card to improve your credit score. This is also an option if you're new to credit.
Can you get a loan with a 600 credit score? ›Yes, you can get a personal loan with a 600 credit score — there are even lenders that specialize in offering fair credit personal loans. But keep in mind that if you have a credit score between 580 and 669, you'll generally be considered a “subprime” borrower — meaning lenders might see you as a more risky investment.
Is it easier to get credit from a credit union? ›When you apply for a credit card through a credit union, you may expect the credit union to check your credit score. However, as a member with less-than-perfect credit, you might find it easier to qualify for a credit card through your credit union than a bank.
Can you get a personal loan with 560 credit score? ›The typical minimum credit score to qualify for a personal loan is 560 to 660, according to lenders surveyed by NerdWallet. Some lenders may require a higher score. A high credit score doesn't guarantee you'll qualify or get a low interest rate.
What does your credit score have to be to get a 10000 dollar loan? ›You will likely need a credit score of 640 or higher to get approved for a $10,000 personal loan. Most lenders that offer personal loans of $10,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.
Can I get a loan with a 575 credit score? ›Credit Rating: 575 is considered a bad credit score. Borrowing Options: Most borrowing options are available, but the terms are unlikely to be attractive. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan for damaged credit, but the interest rate is likely to be high.
How big of a loan can I get with a 700 credit score? ›
You can borrow $50,000 - $100,000+ with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
Do credit unions build credit faster? ›Does joining a credit union build credit? Joining a credit union can help build credit, provided you follow the right steps. For example, if you join a credit union with bad credit, you may want to consider getting a secured credit card to improve your credit score. This is also an option if you're new to credit.
Do credit unions do a hard pull? ›No, generally banks and credit unions do not perform a hard credit check when you are just trying to open a standard bank account. However, they could perform a credit check if you are trying to open a credit card through them or secure a loan of any kind.
How much credit do you need to get a business loan? ›640 to 700: Business loan providers generally consider a credit score that falls somewhere between 640 and 700 to be good but not excellent. Generally, the minimum credit score for SBA and term loans is around 680.
What credit score is needed for a 50k loan? ›You will likely need a minimum credit score of 660 for a $50,000 personal loan. Most lenders that offer personal loans of $50,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.
What does your credit score have to be to get a $30000 loan? ›You will likely need a credit score of at least 660 for a $30,000 personal loan. Most lenders that offer personal loans of $30,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.
What is the average payment on a $10 000 loan? ›Example 1: A $10,000 loan with a 5-year term at 13% Annual Percentage Rate (APR) would be repayable in 60 monthly installments of $228 each. The actual payment amount and year-end balance will vary based on the APR, loan amount, and term selected.
How much would a 5000 loan cost per month? ›Based on the OneMain personal loan calculator, a $5,000 loan with a 25% APR and a 60-month term length would be $147 per month. The loan terms you receive will depend on your credit profile, including credit history, income, debts and if you secure it with collateral like a car or truck.