NerdWallet ("NW"): What is the role that credit unions play in the small business lending space, especially in comparison with other lenders (such as community banks, who also lend to their local communities?
Gary Hinrichs, President & CEO of West Community Credit Union (“GH”): Credit unions fill a void where banks may not be interested in making certain loans to small businesses. Historically speaking, credit unions haven’t played a huge role in the small business lending space, so people are often surprised to hear that we are an option. To help reverse this, we focus on building awareness about our products and services. The majority of our loans are for smaller amounts, but we are also not uncomfortable taking on larger deals on occasion. Credit unions even have the unique ability to work together to offer larger business loans, despite regulations limiting the amount we can lend to any one borrower. We are also very conscious about pricing and fees to ensure that we are providing our members with the best possible value.
NW: How do you see small business lending evolving in the next year?
GH: In short, more demand. We see small businesses starting to recover a bit. Even in tough times, small business owners will reach a point where they have to do something if they want to continue and with interest rates at a low, now is a great time for them to borrow and grow their business.
At the same time, I don’t think the demand for small business loans will explode. There are still many unknowns such as healthcare and other regulations that will make a potential impact on a business’ success.
NW: Please describe your credit union and its unique difference.
GH: West Community Credit Union has been around since 1936, when we were chartered as a community credit union, one of the first in Missouri. Our founders were 11 men with a small business background, so our roots are truly with small businesses. As we’ve grown, we try to serve not only the retail side but also the commercial side of our membership base. In the grand scheme of things, there are not a whole lot of credit unions in Missouri who have the ability to make business loans, which puts us in a unique position to serve the community. As I mentioned before, we strive to price our products with a minimal amount of fees/charges and while remaining competitive in our interest rate pricing.
Most importantly, we really get to know our members and borrowers. We strive to build a long-term relationship with each member, which helps us to provide a higher level of service with a “high-touch” mentality. Small business owners can be assured that they will receive consistent service from the same loan officer throughout the life of the loan, rather than dealing with a variety of different people.
NW: What general advice would you give a small business owner?
GH: It’s important to ensure that you maintain excellent documentation in all facets of your business. A close relationship with accounting is critical since the right financial statements can make or break a loan. Creating a solid business plan is also important, especially for newer businesses, in that it can demonstrate year-over-year where your successes lie. If there were any setbacks or mistakes, make sure to document what happened, why it happened, and what changes have been made since. We know that mistakes happen, and we are willing to work with most businesses as long as they have been able to demonstrate how they learned from the mistake. As a lender, we need to know if your successes are perhaps a one-time event, or if your short-term failures are an indicator of future concern. Uncertainty in our eyes will never work to the borrowers advantage.