A conversation with a doctor who specializes in Lasik surgery revealed a few eye openers for Carma Peters, executive vice president of marketing at Affinity Group Credit Union.
Peters was in the middle of a quest to find a low-cost lending alternative that would allow small business owners to offer financing on their products and services to members at cheaper rates. The doctor told her the financing rates available to his clients are high because he gets slammed by a large amount of transaction fees to offer services like Lasik eye surgery. The wheels began to turn for Peters.
"We wanted to come up with a product that would save him money as well as consumers"- both being potential members, Peters recalled.
To that end, the $100 million Affinity Group in Pontiac, Mich., recently rolled out the SmartChoice loan, which will offer financing to a business's clientele who may need to pay for a unique product or service provided by that business. The businesses can include home improvement companies, wedding planners or even funeral homes, where families have an immediate need for financing an unexpected expense, Peters said.
The loan rates are 8.90% for 24 months, 9.90% for 36 months, 10.9% for 48 months and 11.9% for 60 months. The CU also offers 0% for three, six and 12 months, and the business pays the transaction fees if they choose to offer those to their customers. When paid down, the revolving line of credit can be used for future purchases.
Peters said Affinity Group wants to compete with entities like CareCredit, a credit card used exclusively for health care services. According to the company's Web site, the card is offered at more than 125,000 practices in North America. More than seven million people have used the card over the past 21 years.
"If you go to a dentist or eye doctor, they will offer [the CareCredit card]," Peters said. "It's a private label card that's available to certain types of businesses. We can offer SmartChoice to any type of business."
Peters said Affinity Group has been working on bringing SmartChoice to the surface for the past 18 months. The CU is a co-owner of CU Partner Solutions, a CUSO formed in 2006 by eight credit unions to link up with established firms for discounted rates on services that would have been more expensive if the cooperatives made purchases on their own. The SmartChoice financing is a piece of a bigger package of business offerings such as merchant card services and information technology. More than 33 package accounts have been secured since the suite of services debuted in June 2009.
As for the new SmartChoice loan, Peters said the CU recently signed on its first member, the owner of an electrical company that sells generators. The owner was sold on being able to offer financing to his customers who came in with big jobs but perhaps didn't have enough home equity to tap.
"The advantages for us are we can bring in new members, and it gives us the opportunity to build relationships with business customers," Peters said. "We plan to do extensive follow-up to see if we can offer more services."
Indeed, Peters is already hitting the pavement talking to area businesses about SmartChoice, a local alternative that "keeps Michigan money in Michigan during these challenging economic times."
Affinity Group is serving as the guinea pig here as the first CU within the CU Partner Solutions network to offer the new product.