Credit Crunch Aside, CUs Still Ask for Collateral, Cash Flow
While credit unions continue to tout having more money to lend, some still prefer to deal with existing businesses with positive cash flows and tangible assets.
According to an Intuit small business report of 35 credit unions and other lenders, most are actively seeking to provide credit to small businesses. Still, lending standards, which are not any more rigorous now than in the past, remain high. Nearly all said they have stringent underwriting criteria for granting credit.
Small businesses' use of credit cards is being significantly cut, the financial institutions said. Lenders had mixed views on the SBA's loan programs, the survey's data showed. Some found them lucrative while others said they were "a drain on their business" due to "burdensome" requirements and costs.
The lenders also said micro businesses with less than five employees may have the hardest time getting credit due to a lack of operating history, positive cash flow or collateral.
"Community banks and credit unions can be an excellent and accessible source of credit for small businesses who meet their lending criteria," said Steve King, co-author of the Intuit report and a partner at Emergent Research. "Unlike most large banks, these lenders traditionally steered clear of the creative financial products that now burden much of the financial services industry with large losses and toxic assets."