How To Get A Business Loan From A Credit Union (2023)

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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 withsmall 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.Yourbusiness planis 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 betweenbanks 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? ›

Quick Approval. While a Credit unions may have many branch offices and thousands of members, credit unions often have more streamlined operations than banks. This makes applying for and receiving a loan easier.

Is it easier to get a loan from a credit union? ›

Quick Approval. While a Credit unions may have many branch offices and thousands of members, credit unions often have more streamlined operations than banks. This makes applying for and receiving a loan easier.

What does your credit have to be 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.

Do business loans check personal credit? ›

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.

What is the easiest loan to get? ›

Types of Loans That Are Easy to Get
  • Payday Loan. ...
  • No Credit Check Loans. ...
  • Unsecured Personal Loans. ...
  • Secured Personal Loan. ...
  • Loan From a Friend or Family Member. ...
  • Emergency Loans. ...
  • Hardship Loans from Local Government. ...
  • Hardship Distribution from Your 401(k)
May 1, 2023

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.

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.

What credit score does an LLC start with? ›

You're aiming for a score of at least 75 in order to start getting favorable terms and taking advantage of having a strong business credit rating. The basic steps to start the process of establishing credit for your LLC are as follows: Get an EIN from the IRS. Register for a D-U-N-S number.

What is the minimum credit score for a SBA loan? ›

But remember, the SBA loan will come through a lender, and they have no problem doing so. For the SBA 7(a), this means a minimum score of approximately 640. But you'll increase your chances to be approved for an SBA loan with a minimum credit score of 680 or higher.

How much of a business 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.

Does starting an LLC affect credit score? ›

Does starting an LLC affect your credit score? Starting an LLC will not directly affect your personal credit score unless you decide to personally guarantee or cosign a loan for your company.

Can my business get a loan if I have bad credit? ›

Yes, it is possible to get a small business loan even if you have bad credit. This is because your credit score doesn't matter as much as the overall financial health of your business. Many lenders require a minimum credit score of 500, at least six months in business, and more than $30,000 in annual revenue.

Will a business loan affect my credit score? ›

A business loan can affect personal credit. If you personally guarantee a business loan, your credit will be affected. If you're a sole trader or run a partnership, your finances will also be affected by a business loan. In such instances, your credit scores will reduce if your business delays payments or defaults.

What is the hardest type of loan to get? ›

Unsecured loans are harder to obtain and interest rates can be higher, as lenders rely heavily on your credit and other financial information to determine your loan eligibility. The better your credit score, the better the interest rate you're likely to get.

What is a hardship loan? ›

If your Universal Credit has been cut because of a sanction or penalty for fraud, you might be able to get some emergency money to help you cover household expenses like food and bills. This is called a 'hardship payment'. A hardship payment is a loan, so you'll usually have to pay it back when your sanction ends.

What is the easiest government loan to get? ›

Common loan programs include: Stafford Loans: These are easy to qualify for, and you might receive interest subsidies. PLUS Loans: Parents can borrow substantial amounts, but that means parents will have to repay. 2.

Is it harder to get a loan through a credit union or bank? ›

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.

Can you get a loan with a 500 credit score? ›

Yes, 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.

Do credit union loans build credit? ›

Because credit unions are not-for-profit, they can offer members numerous benefits that can directly and indirectly build an individual's credit score.

Can you be refused a credit union loan? ›

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.

Why not to use a credit union? ›

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network like Allpoint or MoneyPass.

What does 999 credit score mean? ›

Experian, for example, uses a range from 0 to 999. A score of between 881 and 960 is good, between 961 and 999 your score is excellent.

Does an EIN have a credit score? ›

While your personal credit score is tied to your Social Security number, your business credit score is tied to an EIN. This helps you keep your personal financial information private while you build and maintain your business credit score.

Is it easier to get business credit with LLC? ›

Getting Financing for Your LLC

One of the biggest benefits of establishing credit for your LLC is the ability to get access to more financing options. Some lenders simply won't lend to sole proprietorships; your business must be its own legal entity.

Can single member LLC build business credit? ›

Build Credit for a New Single Member LLC

You can build credit as an LLC fairly simply once your business is established. Simply get credit accounts that will be reported to your business credit reports and pay them on time. These may include vendor accounts, business credit cards and small business loans that report.

Are SBA loans hard to get? ›

The short answer – No, it is not hard to get an SBA loan! Most businesses are eligible and qualifying is easier than you might think! The SBA 504 loan is specifically designed to help small businesses expand by purchasing fixed assets such as real estate and equipment.

How much collateral do you have to have to get a SBA loan? ›

Lenders are not required to take collateral for loans up to $25,000. For loans in excess of $350,000, the SBA requires that the lender collateralize the loan to the maximum extent possible up to the loan amount.

How long does it take to qualify for an SBA loan? ›

The SBA loan approval process takes 30 to 90 days from application to funding. However, this time frame varies by lender and loan type. The exact steps for getting an SBA loan can also differ from lender to lender, but there are a few general stages in the approval process: Loan application.

What is good credit for small business owners? ›

Most small business lenders like to see a business credit score above 75, but local lenders may consider lower scores for small businesses or startups. Conventional consumer financing companies rarely make loans to individuals with credit scores below 500.

Can I get a 20k loan with a 700 credit score? ›

You will likely need a credit score of 660 or higher for a $20,000 personal loan. Most lenders that offer personal loans of $20,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

Which FICO score does SBA use? ›

Instead of a personal credit score, the SBA uses the FICO Small Business Scoring Service (SBSS) when evaluating 7(a) loan applicants. The system calculates the business owner's credit bureau data, financials and other factors to produce a number between 0 and 300.

How long does it take to build credit as a new LLC? ›

Experts say it can take three years or more to build business credit, but some creditors may only require one year. If you're trying to establish credit for a new business, these steps can help you get started.

Can I apply for a loan with my EIN number? ›

Can I Use My EIN Instead Of An SSN To Apply For A Loan? Yes, individuals who are not eligible for an SSN can still get business loans using their EIN. The process is usually just as easy as applying for a loan with your SSN.

Can you get a business loan without revenue? ›

Getting a business loan with no revenue is possible, but it may be more challenging to qualify. Most lenders want proof of income before approving a loan, so businesses without any revenue may have to look for alternative financing options. There are some lenders that don't impose a revenue requirement.

Do banks do credit checks for business loans? ›

Most lenders perform a credit check when you apply for a business loan. In some cases, the credit check process might include a review of both personal and business credit reports and scores. Some lenders, like those on our list, require no credit checks.

Can you use a business loan to pay off personal debt? ›

Can you use a business loan for personal use? Short answer: no. Business loans can only be used to provide funding for your business. This means you cannot use the capital generated from a business loan to pay off personal debt or make personal purchases.

Does owning a business help with credit score? ›

Building business credit can help protect your personal credit, limit personal liability, increase credit capacity, help you secure more-favorable terms on loans, help you qualify for lower insurance premiums, and impress anyone evaluating your business — whether they're investors, partners, vendors or clients.

Does a business get its own credit score? ›

Businesses don't have one credit score; they have several. Each of the three major business credit bureaus — Dun & Bradstreet, Equifax, and Experian — calculates and issues unique business credit scores based on their own criteria and algorithms.

What loans to avoid? ›

Here are six types of loans you should never get:
  • 401(k) Loans. ...
  • Payday Loans. ...
  • Home Equity Loans for Debt Consolidation. ...
  • Title Loans. ...
  • Cash Advances. ...
  • Personal Loans from Family.

Is it easier to get a big loan or small loan? ›

Size of the loan: Smaller loans may be easier to qualify for because you'll likely have a smaller monthly payment that may be manageable with your income and expenses. Income: Lenders want to know your income can support repayment on a loan.

What banks are easier to get loans from? ›

The easiest banks to get a personal loan from are USAA and Wells Fargo. USAA does not disclose a minimum credit score requirement, but their website indicates that they consider people with scores below the fair credit range (below 640).

How do I get emergency money? ›

To help you get started with your search, here are five ways to get emergency money when you need it.
  1. Emergency Loans. ...
  2. Friends or Family Members. ...
  3. 0% APR Credit Cards. ...
  4. Home Equity Line of Credit (HELOC) ...
  5. Look to Nonprofit Programs for Help.
Jun 25, 2020

What is a cup loan program? ›

The Caring Unites Partners (CUP) Fund is a financial assistance program funded by partners, for partners. In times of special need, such as losing housing because of a natural disaster or fire, a major illness, a death in the family and more, a partner can apply for a grant to help with certain expenses.

How many hardship loans can you take a year? ›

You can receive no more than two hardship distributions during a plan year (calendar year for all Guideline 401(k) plans). The amount requested may not be more than the amount needed to relieve your financial need, but can include any amounts necessary to pay taxes or penalties reasonably anticipated.

What is the easiest loan to get approved for? ›

Types of Loans That Are Easy to Get
  • Payday Loan. ...
  • No Credit Check Loans. ...
  • Unsecured Personal Loans. ...
  • Secured Personal Loan. ...
  • Loan From a Friend or Family Member. ...
  • Emergency Loans. ...
  • Hardship Loans from Local Government. ...
  • Hardship Distribution from Your 401(k)
May 1, 2023

Which loan is guaranteed by the government? ›

Which loans are guaranteed by the federal government? Government loans are usually not applied for directly from the government agency and are applied for through private lenders offering government-backed mortgages. The three most common federally funded loans are VA loans, USDA loans, and FHA loans.

What is the easiest credit union to get approved for? ›

Credit unions with easy membership requirements
  1. Affinity Plus Federal Credit Union. Affinity Plus Federal Credit Union Superior Money Market Account. ...
  2. Alliant Credit Union. Alliant High-Interest Checking Account. ...
  3. Bethpage Federal Credit Union. Bethpage Federal Credit Union Certificate Account. ...
  4. Blue Federal Credit Union.
May 19, 2023

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.

What are the disadvantages of a credit union? ›

Cons of credit unions
  • Membership required. Credit unions require their customers to be members. ...
  • Not the best rates. ...
  • Limited accessibility. ...
  • May offer fewer products and services.
Sep 16, 2022

What are the pros cons of borrowing from a credit union? ›

The Pros And Cons Of Credit Unions
  • Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
  • High-level customer service. ...
  • Lower fees. ...
  • A variety of services. ...
  • Cross-collateralization. ...
  • Fewer branches, ATMs and services. ...
  • The biggest negative.
Oct 4, 2022

What is the largest credit union in the United States? ›

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. Approximately 130.2 million Americans are credit union members.

What are the benefits of a credit union? ›

Benefits Of Joining A Credit Union
  • Better Rates. ...
  • Lower Fees. ...
  • Better Mortgage Accessibility and Service. ...
  • Protected Deposits. ...
  • Personalized Financial Services. ...
  • Higher-Rated Customer Service. ...
  • You're a member of a socially conscious community.
Jul 13, 2022

Why you should join a credit union? ›

Credit unions typically charge fewer fees than banks, and the fees they do charge are far lower than what you'd pay at a bank. Also, they typically charge lower rates for loans and pay higher rates on savings. Credit unions promote financial literacy, with programs on money management for all ages.

What happens if you don t pay back a loan from a credit union? ›

When you stop paying a personal loan, it could result in your account going into default, the balance being sent to collections, legal action against you and a significant drop in your credit score. If money is tight and you're wondering how you'll keep making your personal loan payments, here's what you should know.

What is a low credit score? ›

In the VantageScore model, a score between 300 and 660 is considered a bad credit score, with scores below 500 deemed very poor. The VantageScore model breaks down its credit score ranges as follows: Very Poor: 300-499. Poor: 500-600. Fair: 601-660.

What bills build credit fast? ›

What Bills Help Build Credit?
  • Rent Payments. Before property management platforms, renters were unable to report rent payments to credit bureaus to build their credit health. ...
  • Utility Bills. ...
  • Auto Loan Payments. ...
  • Student Loan Payments. ...
  • Credit Card Payments. ...
  • Medical Bills.
Nov 28, 2022

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.

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