What’s the difference between getting a business loan with a credit union versus a community bank? The Business Services team at Greater Nevada Credit Union (GNCU) gets that question often, and this is how I explain it.
After being a banker for more than 20 years, I joined the GNCU family in May 2013 to lead the Business Services department. Up until then, I had almost convinced myself that credit unions and community banks were the same. Now that I've had time to witness with my own eyes the differences, (some might say, seeing the light), I’m excited to help Northern Nevada businesses understand the advantages of turning to us for a business loan.
First, credit unions and community banks that offer business services do have similarities. Safety is neck and neck; both are federally insured (Banks by FDIC and Credit Unions byNCUSIF). Products and services are often pretty comparable, as are locations, though some credit unions, (including ours) belong to ATM and shared branching networks that provide literally thousands of access points around the country.
There are some other major differences, and they’re tied directly to how these two types of financial institutions are structured.
Members vs. Customer
Credit Unions consider people who use their financial services as members, not customers. So by getting a small business loan from a credit union you’re part owner in the enterprise. Most banks are owned by investors who have large amounts of capital for funding the bank. What does this mean for you, the borrower? Because you are a member/owner of your credit union, you’re more than just a number.
Not for Profit vs. For Profit
Any earnings made by a credit union benefits its members (after paying expenses) since credit union’s are not for profit organizations. A bank’s primary purpose is to make a profit for its outside investors and stock holders. So, one of the ways credit unions return earnings to members is through better rates and terms on loans.
In closing, credit unions and community banks offer similar products, are insured, and provide an important role in their community. What you need to decide when choosing between the two is if you want to be an owner or a number at your financial institution. And if you want to earn a return for the business you conduct versus providing a return for an outside investor.