Credit Union Business Loans: Overview and How to Get One
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Credit union business loans offer competitive interest rates, long repayment terms and strong customer support. Like other traditional small-business loans, however, they can be difficult to qualify for.
You’ll likely need a good credit- and financial history — plus, you’ll need to be a member of the credit union where you’re applying.
Here’s everything you need to know about credit union business loans and how to decide if they’re the right option for your needs.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
What is a credit union?
Credit unions are not-for-profit cooperative financial institutions owned by their members. They often offer many of the same services as banks but return their profits to members through dividends, lower business loan rates and other benefits.
Credit unions typically have membership requirements based on address, place of employment or membership in certain associations, institutions or groups.
Types of credit union business loans
Like banks, credit unions can offer a variety of business loan options, including:
Loan type | Summary | Use cases |
Lump sum of capital you borrow from a lender and repay, over a set period of time, with interest. | Specific investments in your business, such as purchasing equipment or inventory, renovating your location or hiring new employees. | |
Gives you access to a specific amount of funds that you can draw from as needed. You only pay interest on the money you draw. | Working capital, managing cash flow, unexpected expenses. | |
Partially guaranteed by the SBA and issued by banks and credit unions, many SBA loans function as term loans. | Working capital, refinance current debt, purchase equipment, buy an existing business. | |
Loan specifically used to purchase machinery and equipment. Equipment you purchase serves as collateral on the loan. | Purchase and install equipment and machinery. | |
Loan designed for the purchase or renovation of commercial property. | Buy real estate, buildings or land, renovate property, refinance existing real estate. | |
Financing that allows you to purchase used or new vehicles for your business. | Buy cars, vans, trucks and some other vehicles. |
Pros and cons of credit union business loans
Typically, the best loan for your business is the one with the lowest interest rate that you can qualify for. Other factors, however, like funding time and customer support, may also play a crucial role in your decision.
Use these pros and cons to help you determine if you should get a credit union business loan.
Pros
Low interest rates and fees. Credit unions tend to offer lower business loan interest rates and fees compared to other lenders — even banks. Although the data doesn’t focus specifically on commercial lending, a National Credit Union Administration comparison of average savings and loan rates for credit unions and banks shows credit unions have a rate advantage in many product areas, including credit cards, unsecured loans and car loans. Ultimately, rates vary from lender to lender, but if you have strong personal and business financials, you’ll likely get a good deal at a credit union.
Support for underserved borrowers. Many credit unions are community development financial institutions. This can increase the odds of loan approval for some applicants. CDFI certification is a U.S. Treasury Department recognition of specialized financial institutions providing financial products to low-income and first-time borrowers, including small businesses. There are over 500 credit union CDFIs.
Personalized customer service. Because credit unions are not-for-profit institutions owned by their members, they’re generally known for their strong customer service and support. In addition to competitive business loan options, credit unions typically offer a wide range of other financial products, including bank accounts, credit cards and consumer loans. Members are usually able to access customer representatives in multiple ways — sometimes 24/7. Many credit unions even offer customized financial or business guidance services for their members.
Cons
Strict eligibility requirements. Like business bank loans, you’ll likely need strong credit, good finances and multiple years in business to qualify for a loan from a credit union. Although specific eligibility criteria will vary from lender to lender, it may be more difficult to get a credit union business loan if you’re a startup or have bad credit.
Membership required. You have to be a member to open a business bank account or apply for a loan from a certain credit union. Membership may be restricted based on your location, place of employment or membership in particular associations or groups.
Smaller than banks. Although a smaller institution may be able to offer more personalized service, it can also have some drawbacks. Credit unions may have fewer product options, a limited lending capacity for larger loans and a fewer number of branch locations compared to some banks. Credit unions may also not be up to date on the latest technology, so you might not be able to apply or manage your loan process online.
Where to get a credit union business loan
There are thousands of credit unions in the United States, but just over 25% issued business loans in 2022. To find a credit union in your area, you can use the locator on the National Credit Union Administration’s website.
You’ll need to find a credit union that offers the business loan you’re looking for — where you can also qualify for membership. Start your search with these top options:
Navy Federal Credit Union
Navy Federal Credit Union is the largest federally insured credit union by total members and assets, according to the most recent data from the National Credit Union Administration. The credit union has 356 branches worldwide, which includes 26 international locations.
Business loans available: Term loans, lines of credit, real estate loans, vehicle loans.
Membership eligibility:
You or one of your family or household members must have ties to the armed forces, Department of Defense or National Guard.
To get a business account or loan, you must also apply to become a business member. To qualify, all business owners must have a Navy Federal membership.
Learn more about Navy Federal business loans.
Boeing Employees' Credit Union
Boeing Employees' CU is also one of the largest credit unions in the United States. It’s headquartered in Tukwila, Washington and has over 50 locations across the state, as well as two in North Charleston, South Carolina.
Business loans available: Term loans, business vehicle loans, lines of credit, commercial real estate loans.
Membership eligibility:
Anyone who lives, works, worships or goes to school in Washington state or certain counties in Oregon or Idaho, as well as anyone who has worked or volunteered for Boeing. Alumni of the University of Washington and Washington State University are also eligible.
For businesses, the criteria are similar. BECU does not offer membership to internet gambling companies, marijuana dispensaries or businesses related to money services.
America First Federal Credit Union
Based in Riverdale, Utah, this credit union has over $17 billion in assets and more than a million members. It's also one of the most active credit union SBA 7(a) lenders in the United States.
Business loans available: SBA loans, lines of credit, business vehicle loans, equipment loans, unsecured capital loans, acquisition and franchise loans, and commercial real estate loans.
Membership eligibility: Live, work, worship, volunteer or attend school in specific areas of Utah, Nevada, Arizona, Idaho, Oregon or New Mexico; be involved in the food industry in Utah; have family that qualifies.
» MORE: Best SBA lenders
Digital Federal Credit Union
Digital Federal Credit Union is a digitally focused credit union based in Massachusetts. The institution has over 1 million members in all 50 states.
Members can access services through local branches in Massachusetts and New Hampshire, as well as through thousands of Co-op Shared Branch locations across the U.S. The Co-op Shared Branch network allows members of a certain credit union to make transactions at another credit union.
Business loans available:
Small-business vehicle loans and equipment loans; commercial mortgage loans, commercial lines of credit, commercial construction loans, commercial term loans.
Vehicle loans are available to business owners in any state. Equipment and commercial term loans are only available to business owners located in New England. You must be located in Massachusetts, New Hampshire or Rhode Island to qualify for all other types of commercial loans.
Membership eligibility: Live, work, worship, attend school or be a business located in certain communities in Massachusetts; work or be retired from one of hundreds of eligible companies; join one of eight local non-profit organizations (anyone can join, membership fees are required).
Blue Federal Credit Union
Based in Wyoming, Blue is a smaller credit union (over 115,000 members) that, like DFCU, expands its reach through the Co-op Shared Branch network. Blue has 20 of its own branches throughout Colorado and Wyoming, serving many of the civilian and military personnel who work at or assigned to the Francis E. Warren Air Force Base in Cheyenne.
Business loans available: Commercial mortgage loans, vehicle loans, term loans, commercial lines of credit, commercial construction loans, equipment loans.
Membership eligibility: Work at the Francis E. Warren Air Force Base or be stationed at the base as a member of the U.S. military; work or belong to an eligible organization in Wyoming or Colorado; donate to the Blue Foundation (a nonprofit that supports local causes) by opening an account and depositing $10.
» MORE: Best commercial mortgage lenders
How to get a credit union business loan
The process required to get a business loan from a credit union will be somewhat similar to that of getting a bank loan. Here are the steps you can follow:
1. Understand your financing needs
You’ll want to determine how much capital you need, what you’re going to use it for and which type of loan is best for your business. You should also consider your current finances and use a business loan calculator to figure out how much debt you can afford.
2. Evaluate credit union business loan requirements
Like other lenders, credit unions will likely look at your credit score, annual revenue and time in business when evaluating your loan application. They may also consider your available collateral, cash flow and sales projections.
It’s important to evaluate your information ahead of time so you have a sense of where you stand when you apply. Keep in mind that credit unions often have stricter business loan requirements than alternative lenders.
3. Research credit unions
As you research and compare different credit unions, you’ll want to consider their business loan offerings — including loan options, interest rates, repayment terms and fees — as well as their membership criteria. You’ll need to find a credit union that has the business loan product you want where you’re also eligible for membership.
4. Become a member
Before you can apply for a business loan, you’ll need to become a member of the credit union you’ve chosen. To join the credit union, you’ll usually need to fill out an application with basic details about yourself and your business.
You’ll also need to provide verification that you meet the criteria for membership, such as proof of address or employment at an eligible organization.
5. Prepare and submit your loan application
Once you’re a member, you’ll be able to move forward in the business loan application process. With some credit unions, you may be able to submit an application online or over the phone, whereas others will require you to visit a branch location.
In general, however, you’ll need to provide the following:
Basic information about your business, including its official name, address and tax ID number.
Business plan.
Business and personal bank statements.
Business and personal tax returns.
Financial statements (e.g. profit and loss statement, cash flow statement).
Collateral information, if applicable.
Details about the business owners, including names, Social Security numbers and addresses.
6. Review your loan agreement and get funded
After you submit your loan application, it may take anywhere from a few days to a few weeks to receive approval and funding. Once you’ve been approved, your lender will send you a business loan agreement to review.
You should read the agreement thoroughly and make sure you understand all the terms and conditions. If you have any questions or concerns, talk to your lender before signing.
Once you’ve signed the loan agreement and returned it to your lender, they’ll release your funds, typically through a direct bank transfer.
Find the right business loan
The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
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