Wednesday, August 02, 2006

When the Bank Says No, Ask a Credit Union

In today's LA Times Small Business Report, Cyndia Zwahlen tells of a San Diego borrower who found a credit union to provide a small business loan secured by real estate after being declined by a bank.

The article discusses a possible paradigm shift with credit unions moving into small business lending. Zwahlen notes that banking industry consolidation has left some small business owners without the local banker with whom they might have been used to working. Plus, some business owners want loans that are too small to be practical for many commercial lenders.

Expect to initially see credit unions primarily compete with smaller community banks for loans under $150,000. Don't expect the underwriting criterion to be significantly different from a bank - one credit union alliance is still rejecting about 70 percent of business loan applications. That tells me they've got a long way to go before being serious providers of small business loans.

Please feel free to contact me with questions or ideas for future articles!

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