There are numerous options when looking for commercial financing. Large national and regional banks can certainly fit the bill if you’re looking for large amounts of capital and a wide array of services. But do the large banks want your business bad enough to be responsive? If your business is like the vast majority of small businesses that drive the US economy, you will likely do best with a local community bank or credit union that is responsive to your needs without crushing you with fees and red tape.
The Lehigh Valley Market
The latest U.S. Census Bureau statistics state that there were 5.73 million employer firms with less than 500 employees in the nation. Businesses with less than 20 workers accounted for 89 percent of the small business workforce category. Locally, research done by the Lehigh Valley Economic Development Corporation indicates that the Lehigh Valley Region has 14,645 businesses and that just 114 of those businesses have more than 250 employees. In addition, data from the U.S. Small Business Administration shows that 99% of the people employed in the Lehigh Valley work for small businesses. Eighty-four percent of employee locations in the region have less than 20 workers. The economic impact that small businesses have upon the region is large and undeniable.
Need For Capital
What do all these businesses have in common? They all need capital to survive and grow. For businesses large and small, access to capital is the engine of growth. In today’s financial markets, there are numerous sources of funding. The most common sources are commercial banks. Since the easy money days of the Great Recession, commercial banks have been under new regulations designed to prevent another needless downturn like the one we recently faced. At the same time, many of these new regulations have put undue strain on the banking system, especially on the larger banks with over $10 billion in assets. As a result, the relative cost of serving the small business community has presented a challenge for larger banks.
The small business customer will likely find a better home with smaller community institutions that have a vested interest in the communities they serve. After all, these institutions live and die by the financial health of these communities.
Credit Unions
One of the often overlooked sources of business capital is the Credit Union. Credit Unions are unique in that they are not-for-profit entities. They do not issue stock and have no investors other than their members. Credit Unions are the quintessential community bank, literally owned by the community. As such, they are relationship driven as opposed to profit driven. The member is the focus of the institution, not the need to provide higher dividends to the stockholders.
Credit Unions are regulated and insured by the National Credit Union Administration of the US government. Being member owned and federally insured translates to higher interest rates for savings and lower interest rates on debt. The organizations typically operate with less red tape, lower fees, and quicker decisions. It is not unusual to get a commercial loan decision in a matter of days.
In order to do business with a credit union, you will need to become a member. The easiest to join are those that have a Community Charter. In this case, the organization accepts members who live, work, or worship in a given geography. Other credit unions accept members based on their affiliation with a specific employer or group, or for members of a given trade, industry or profession. There are two major credit unions in the Lehigh Valley offering commercial loans; People First Federal Credit Union is one of them. People First is a Community Chartered credit union and accepts members who live, work, or worship in Lehigh and Northampton Counties. People First currently has 66,000 members or roughly 10% of the population of the Lehigh Valley! There’s nothing better than banking where you own the place.
For more information, contact John Orsini, Business Loan Officer at People First Federal Credit Union 610-797-7440 x 120, or orsinij@peoplefirstcu.org
