More small businesses are looking to credit unions to help them get loans through the Paycheck Protection Program’s (PPP) second round. Advocates say they’re offering faster access than bigger banks can provide.
Small Business Trends contacted Dr. David L Tuyo II, DBA, MBA, President and CEO of University Credit Union to find out more about this trend.
“Credit unions offer traditional banking products and personalized financial services through a community-oriented approach,” he writes. “They are created, owned, and operated by their members and operate as not-for-profit institutions.”
Credit Unions Help Small Business with PPP LOans
It’s this focus that is at the heart of helping small businesses get PPP loans. Tuyo describes how this personalized approach in specific markets has helped SMBs.
“Credit Unions act in the best interest of their member-owners and not shareholders,” he says.
“Since credit unions are not-for-profit organizations, they can pass “would-be profits” forward as better loan rates, higher savings rates, and lower fees for members.”
Here’s why that matters to the current round of loans.
The recent PPP program allows credit unions to deepen relationships with their members. According to Tuyo, these CUs are striving to understand individual small business needs and provide PPP support.
Numbers from Tuyo back these claims up. Through July, 934 credit unions granted 1.2 million PPP loans for $9.7 billion, supporting over 1.2 million jobs.
What’s more, the structure of a credit union makes it a smart choice for small businesses looking for this help. Tuyo explains.
“Being located in the markets they serve proves a huge advantage,” he says. “Credit unions understand the needs of the communities they serve and can convene quickly – as opposed to lengthy board processes in larger institutions.”
They can also move faster to get the help to where it’s needed.
Nature of Business
“Given the nature of their business models, CUs are able to pivot faster to assist members and small businesses in need.”
The people at University Credit Union are good examples of how staff have leveraged digital banking tools. They’ve included a digital assistant, live video chat and a digital banking app to meet the increased demand from the PPP program.
The second round of funding focuses on small businesses, non-profits, sole proprietors and independent contractors.
“The revised legislation has placed emphasis on industries that were severely impacted by the pandemic,” Tuyo says. “These include live event venues, movie theatres and cultural institutions. The hospitality industry (hotels and restaurants) may also qualify for 3.5 times their payroll.”
That’s an increase from 2.5 times in the previous round of PPP.
There are a few requirements to be eligible. Small businesses can have a maximum of 300 employees.
“ They also need to show more than a 25% reduction in gross receipts during the first, second, third, or fourth quarter in 2020 relative to the same quarter in 2019,” Tuyo says.
For the latest, follow us on Google News.
More in: PPP Loans