2 in 3 Credit Union Members Want to See More Innovation Around Business Loans

credit unions, SMBs, loans

Credit unions have long been known for personalized services and high levels of member satisfaction. But new evidence also suggests they’re also uniquely suited to serving businesses’ financial needs, as they can often offer businesses better service and better terms than larger financial institutions. 

What’s more, 66% of credit union members are already interested in opening business lines of credit with their credit union, according to the Credit Union Tracker, a PYMNTS and PSCU collaboration.

Get the report: Credit Union Tracker 

However, even though credit unions are consistently the highest scorers of all financial institutions in customer satisfaction with lending practices, they rank at or near the bottom in the actual share of loans held by small businesses. 

An Unmet Demand for Small-Balance Business Loans 

These findings represent significant opportunities credit unions can’t afford to miss. 

“As small businesses continue to face challenges in the current economic environment, credit unions have an opportunity to play a critical role in guiding SMBs through their ongoing recovery efforts,” PSCU EVP and Chief Experience Officer Dean Young told PYMNTS. 

This is important at a time when most Main Street business owners expect solid sales growth in 2022, but also worry about inflation and economic uncertainty. 

Read more: Two-thirds of US Main Street Businesses are Bullish on 2022 Sales 

Small-balance business loans — ranging from $25,000 to $250,000 — offer credit unions an opportunity to shine, not just because of the characteristics credit unions bring to lending, but also because of the unmet demand for these loans. Business lenders generally avoid small-balance business loans due to their relatively low return on investment. That leaves many new and existing entrepreneurs shut out of traditional business lending. 

Credit unions may even find that many entrepreneurs attempting to start a business already are credit union members. 

A Growing Desire for Digital Banking Experiences 

Leveraging existing loyalty is not necessarily enough to win new members and retain existing ones, business or otherwise. The pandemic has pushed members to conduct many of their financial affairs online, and many are seeking out the digital banking experiences they’re becoming increasingly familiar with. 

And while credit unions may have a lot to offer prospective business clients, they also have to overcome any real and perceived challenges to attract and retain members. Credit unions will have more opportunities to work with businesses down the line, but they must take stock of their member service approaches and digital toolkits to stay competitive with other financial institutions over the long haul. 

“Now is the time for credit unions to shift the narrative and define how they can effectively leverage the right tools and data to establish a different kind of engagement model driven by analytics: an ‘opti-channel’ approach which enables credit unions to use data to create experiences specific to each individual and small business member,” Young said. 

Credit union service organizations and other third-party partners can offer advice and assistance on modernizing and automating the lending workflow to lower costs and risks. By taking a page from the FinTech playbook while maintaining the personalized service they are known for, credit unions can turn small businesses’ unmet lending needs into infinite growth possibilities.