As a result of the coronavirus pandemic, some small businesses have been pushed to the brink. Whether it’s due to local legislation restricting business hours and capacity, or people’s general fear of going out in public, there’s no denying small businesses have been struggling.
But as regulations are being lifted, and people are becoming more comfortable with going out in public once again, small businesses are slowly making a comeback.
Still, there’s a long road ahead before things get back to normal. Luckily, local credit unions are taking steps to ensure the road is smoother for small businesses.
A major step is the continued approval of loans for local enterprises.
In a rush to roll out the Paycheck Protection Plan (PPP), large banks quickly maxed out on loans or only accepted existing customers. Many small businesses that were left out by large banks turned to credit unions and local banks. Why were they more willing to lend? Because investing in the community is not only necessary for jobs to survive, it’s crucial to the survival of credit unions as well.
“When things go bad, credit unions aren’t nearly as adversely affected as everyone else because they have a lower risk profile going into it,” said Bill Hampel, a credit union consultant and economist. “Their need to react to stem losses is much lower.”
Data shows that 46% of credit union PPP loans went out to businesses with 10 or fewer employees. This bodes well for small, local operators because they often lack the finances to survive crises alone.
Credit unions, by their nature, are more suited than banks to provide loans in the midst of a crisis. By offering low-interests loans, credit unions attract the attention of local business owners whose operations have suffered as a result of the pandemic. On top of low interests loans, credit unions are working to cut loan rates even further, and approve special emergency loans.
Unlike large, for-profit banks, the goal of credit unions isn’t to make as much money as possible on interest rates. Their goal is building lasting relationships within the community. Because local business owners are some of the main clients for credit unions, taking care of members means better business in the long run.
Taking care of the community also means being willing to work with individual, specific cases. If someone can’t make their loan payment on time, a credit union is more likely than a bank to work with them on a plan to pay off that loan over time.
The same goes for business owners. As Florida moves throughout the phases of reopening society, regulations holding back certain businesses are being lifted. That means more customers are spending their money, which means many places are slowly gaining their revenue back.
That slow progress likely results in the need by many enterprises for more time to pay off a PPP or small business loan. Guess who’s very likely to work with these kinds of cases?
Credit unions understand that everyone is being affected by the pandemic in different ways. That’s why they’re willing to work with members to ensure they stay afloat.
Find out how different credit unions are responding to coronavirus here.