When it comes to small business banking, people often wonder whether a bank or credit union can fulfill their needs. Each has its appeal and drawbacks, and which one is best for your needs will depend on a variety of factors from business size to location. These days, you can even use business online banking with a bank that is fully online or use a mobile application.
The following will help you see which side is right for you.
Benefits of Choosing a Regular Bank
First, deciding between banks and credit unions means finding out what each offers. One thing you are going to love about banks is the high accessibility of services, including business loans, throughout the country.
Credit unions are small, usually local, institutions and that means you probably won’t find them everywhere. Regular banks have branches all over the country. Some of them even have branches outside the country. If you must go to a branch frequently or you travel a lot, then you might want to stick with a regular bank.
Large banks also offer tech features that you might not be able to enjoy if you bank with a smaller bank. Those who do a lot of online banking might find it difficult to work with a smaller bank if said bank has too many customers to handle or does not use financial software like FISCAL to streamline their work. It means you may need to wait longer for support. More businesses are working online, so a bank that can keep up with your needs is of the utmost importance. Online banking can include things like check deposits or instant money transfers, just to name a few things.
Traditional banks offer a number of financial products that smaller institutions don’t have. Business owners who want to have various business loans, mortgage options, and credit cards should consider working with a large bank. Credit unions usually offer these but might not have a lot of options available, which could limit you. This is usually a problem for big business owners rather than small to mid-size business owners.
Perks of Going for a Credit Union
Now you know the benefits of working with a traditional bank, but there are some serious perks for those who decide to work with credit unions.
According to Centris FCU, an Omaha federal credit union, these institutions are non-profit organizations which means that there are no stakeholders or profit margins behind their operations. They are focused on providing the community with banking services and therefore, can offer lower interest rates on loans and higher rates on savings.
Moreover, credit unions don’t have as many regulations as larger banks. This means that loans and other financial products you are hoping to get may be approved by a credit union rather than a larger bank. Nonetheless, fewer regulations don’t translate to lower reliability or security. Federal credit unions are regulated and supervised by the National Credit Union Association. Small businesses apply for financial assistance all the time to stay afloat. Sometimes, you have to get a loan to complete renovations or to make some repairs. Those who have poor credit have a higher chance of landing that loan with a credit union, so keep this in mind.
You should know that fees are generally low or non-existent with credit unions. On the other hand, banks charge for most services, which makes it more expensive to work with them. Depending on how many financial transactions your small business has to do, there’s a potential of saving hundreds of dollars each year.
Further, every loan you are approved for comes with interest rates. These do add up because most loans take some time to pay off. The good thing is that credit unions offer loans at much lower rates compared to larger banks. Receiving the loan at a lower rate gives you a sense of peace you won’t get anywhere else. Not only will paying the money back be a little easier, but you’ll also finish faster.
When it comes to savings accounts, credit unions award you a healthy interest rate, so you’ll be making more money with their savings accounts. Large banks offer savings accounts with interest, but they don’t normally give high return rates.
Which One is the Best for Businesses?
You need to choose the option that works best for you, but it’s clear that for business owners, a smaller credit union might be the right choice. This is especially true if you have a local business with one or a few locations and don’t need to bank all over the world. Small businesses often need help to help effectively handle their small business lending.
Credit unions simply give you more for your buck, and they are willing to work with you even if you aren’t as financially stable as bigger companies. Working with a credit union also means you are going to be helping the community you are living in rather than a large corporation that isn’t invested in your community.
Talk to both and find out which one offers the perks you need. Don’t be afraid to ask questions until you feel ready to make your choice.