Small Business Owners Provide Opportunities for Credit Unions

By Jon Haller
Director of Market Research
Credit Union National Association

Credit unions and banks alike are increasingly recognizing the opportunities and potential bottom-line benefits associated with serving small business owners. While the number of credit unions offering business services continues to grow, small business owners—at one point, a group that clearly played second-fiddle to large businesses at most banks—are becoming a more prominent target for other providers as well. In 2004, more than 65% of banks wanted to increase their spending to attract small businesses—up from 56% in 2003, according to a recent American Banker Association study, as reported in CUNA’s upcoming 2005-2006 Credit Union Environmental Scan Report.

At the same time, there is reason for credit unions that offer, or are considering offering, these services to be optimistic. Consistent with findings from other studies, results from a number of Business Services Surveys conducted by CUNA on behalf of individual credit unions suggest there are sizeable opportunities for credit unions to make headway in the business services market, as many small business owners, as a whole, currently are not overly impressed with their present primary provider. In fact, half (52%) of current small business owners are less than "very satisfied" with their current business PFI, according to CUNA Business Services Survey benchmarks (see graph).

Enticements such as free business checking accounts and/or electronic bill pay, short 1-page loan applications for loan amounts of $50,000 or less, and business equity lines allowing owners to use their home’s value to qualify for short- or long-term credit of up to $250,000 (currently offered by Wachovia) are becoming more commonplace as banks work to become more small-business friendly.

If your credit union does not currently offer business services, now may be the time to find out if the demand for them exists within your membership and/or the surrounding area, what specific services business owners would use at your credit union, what services they currently use, which institution they now turn to for their business needs, how satisfied they are with this provider, and what your credit union would need to do in order to attract their business.

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