Tag Archives: Small Business Administration

A Guide to Applying for a Bank Loan

Wells Fargo No. 1 SBA lender for Arizona

Wells Fargo & Company announced it is the No. 1 Small Business Administration (SBA) 7 (a) lender in Arizona in amount of dollars and number of loans  approved for fiscal year 2014.  Wells Fargo approved $89,034,400 and 197 loans to Arizona businesses from Oct. 1, 2013 and Sept. 30, 2014.

“Working with small business owners is one of the most important things we do and is a key focus for our company,” said Greg DeJesus, SBA regional sales manager for Wells Fargo Arizona.  “Every SBA dollar we lend helps an Arizona business owner start, expand or invest in a business and helps keep the Arizona economy strong.  We believe that the flow of new loan dollars into our communities represents a very powerful statement for job creation and economic development.”

Nationally, Wells Fargo approved a record $1.6 billion in Small Business Administration (SBA) 7(a) loans in federal fiscal year 2014 (Oct. 1, 2013 – Sept. 30, 2014).  The company increased its dollar volume of SBA 7(a) loans by 10 percent from a year ago. An SBA preferred lender in all 50 states, Wells Fargo also is the second largest SBA lender by units, extending 4,036 SBA 7(a) loans in federal fiscal year 2014, a 16 percent increase in units from the prior year.

Wells Fargo is the No. 1 SBA 7(a) lender in dollars in 10 states: Arizona, California, Colorado, Minnesota, North Dakota, Nevada, New Mexico, Oregon, South Carolina and Texas  – and the No.1 SBA 7(a) lender in number of loans (units) in 8 states: Alaska, Arizona, California, Georgia, North Carolina, New Mexico, South Carolina and Virginia.

5 C's of Credit

Wells Fargo Arizona No. 1 SBA lender in dollars

Wells Fargo & Company (NYSE: WFC), America’s No. 1 small business lender, today announced it is the No. 1 Small Business Administration (SBA) 7 (a) lender in Arizona in amount of dollars for the seventh consecutive year and tied for #1 in terms of number of loans  approved.  Wells Fargo approved $75 million dollars and 176 loans to Arizona businesses from Oct. 1, 2012 and Sept. 30, 2013.

“Wells Fargo has a long history of supporting the growth of Arizona’s small businesses and providing credit to meet their financing needs,” said Jim Valley, SBA regional sales manager for Wells Fargo Arizona.  “We believe that the flow of new loan dollars into our communities represents a very powerful statement for job creation and economic development, and we are pleased to provide financial support that gives business owners the funds they need to grow their businesses, retain employees and continue to create new jobs in our community and across the country.”

Among the customers who Wells Fargo helped become business owners with an SBA loan are military veterans Bradley and Barbara Frey of Tucson, Ariz. The couple secured an SBA 7(a) loan to buy a mobile home parts manufacturing business, M&M Home Supply Warehouse, earlier this year.

“My wife and I have always dreamed of running our own small business together,” said Brad Frey. “As new small business owners, it was a daunting task to get our business up and running, but Wells Fargo helped us from the beginning and is a significant reason why we are thriving. My wife and I had tears of happiness when we were signing our loan documents because we could not believe our dream was now a reality.”

Nationally, Wells Fargo approved a record $1.47 billion in Small Business Administration (SBA) loans in federal fiscal year 2013 (Oct. 1, 2012 – Sept. 30, 2013) and for the fifth consecutive year is America’s leading SBA 7(a) lender in dollar volume. This is the third year in a row that Wells Fargo has approved more than $1 billion in SBA 7(a) loans to small business owners – the only lender to achieve this milestone.  An SBA preferred lender in all 50 states, Wells Fargo also is the second largest SBA lender in units extending 3,481 SBA 7(a) loans in federal fiscal year 2013.

Wells Fargo is the No. 1 SBA 7(a) lender in dollars in 12 states: Arizona, California, Colorado, Florida, Georgia, Iowa, Minnesota, New Mexico, Pennsylvania, South Dakota, Texas and Virginia – and the No.1 SBA 7(a) lender in number of loans (units) in 11 states: Alaska, Arizona (tied), California, Colorado, Florida, Georgia, Nevada (tied), New Mexico, South Carolina, South Dakota and Virginia.

Vickie Wessel

Vickie Wessel – 50 Most Influential Women in Arizona Business

Vickie Wessel – Owner, Spirit Electronics

Wessel founded Spirit in 1979 and her innovative leadership has helped Spirit receive Raytheon’s coveted 3-Star Supplier Excellence Award for four consecutive years of, Boeing’s Performance Excellence Award, Distributor of the Year by Arizona’s Minority Business Development Agency, Distributor of the Year by the Grand Canyon Minority Supplier Development Council, and Region IX Subcontractor of the Year by the Small Business Administration.

Surprising fact: “I am an avid road bicyclist. I love to bicycle anywhere from 15-50 miles in a day.”

Biggest challenge: “Balancing work and my personal life as a single mother. Being involved in my children’s lives has been my No. 1 priority … Sometimes I was extremely tired from days with no down time, but I attended every function I could attend. I am happy that I did.”

Fifty Most Influential Women in Arizona Business – Every year in its July/August issue Arizona Business Magazine features 50 women who make an impact on Arizona business. To see the full list, read the digital issue >>

wells fargo - home for veteran

Initiative Helps Veteran-Owned Small Businesses

Veterans who own small businesses in Arizona can save up to $3,000 by tapping into a new loan program called VetLoan Advantage.

The program, offered by CDC Small Business Finance, features rebates and fee waivers associated with SBA-504 loans (for commercial real estate purchases) and Community Advantage loans for working capital, equipment purchases and other needs.

According to the U.S. Small Business Administration, veterans are at least 45 percent more likely than those with no military experience to be entrepreneurs, and often times face challenges in raising capital or getting a conventional loan.

“Veteran-owned small businesses employ nearly 5.8 million people nationwide, making the need for loan assistance vital to our recovering economy, said Chris Bane, loan officer with CDC Small Business Finance. “These programs are our way of saying thanks to vets for their honorable service.”

The VetLoan Advantage programs in Arizona by CDC include:

SBA-504 – for purchasing commercial/industrial buildings or large equipment.  CDC will issue a cash rebate up to $3,000 for any funded loan to help veteran owners offset loan expenses.  The SBA-504 loan offers a low-down payment (typically 10%) and long-term fixed rates (now under 5%).

Community Advantage – provides up to $250,000 for working capital, equipment, inventory, tenant improvements and business acquisition.  CDC will waive the packaging fee for veterans, a savings of up to $2,500.

For more information visit: http://cdcloans.com/small-business/vetloan-advantage/

CDC Small Business Finance is the nation’s leader in SBA-504 loans as well as a leader in helping start-up and emerging small businesses via a variety of other SBA loan programs.

paying_for_online_education

NAU Introduces Personalized Learning

Ushering in a new chapter in 21st century higher education, Northern Arizona University (NAU) announced the launch of its Personalized Learning program, offering accredited, competency-based online bachelor’s degrees for just $5,000 a year. Initial degrees include Computer Information Technology, Liberal Arts and Small Business Administration. Students can begin the application process at www.nau.edu/personalizedlearning.

“Personalized Learning marks a watershed moment in higher education,” said John Haeger, president of Northern Arizona University. “As the first public university to launch this kind of competency-based program, Northern Arizona University is opening an entirely new level of access to a respected university education.”

Unlike standard online courses that offer repackaged content from traditional classrooms, or today’s popular MOOCs (Massively Open Online Courses), NAU’s Personalized Learning program enables students to earn a bachelor’s degree online in a time- and cost- effective manner by crediting their existing knowledge and tailoring coursework to their learning preferences.

“Personalized Learning takes the learning objectives of traditional college coursework and reorganizes them to be more engaging and applicable to today’s workplace,” said Fred Hurst, senior vice president, NAU-Extended Campuses and creator of Personalized Learning. “This program is about creating a skilled and inspired adult workforce with the necessary critical thinking skills that meet the demands of employers.”

Klocke Dan dpp 6-14-05

Phoenix Public Market boosts micro-businesses

Micro businesses may be small, but they pack a big punch.

Though defined as businesses with less than five employees, www.microexec.com reports that micro firms “represent a staggering 99.7percent of all the employer firms in the country.”  That means more than half of all private-sector employees work for micro firms which pay “44 percent of the total private payroll in the county.”

A Small Business Administration (SBA) report in March 2010 showed that micro businesses created 64 percent of all net new U.S. jobs from 1993 to 2009.

For many micro-business owners, making their first foray into business can be a challenge.  The Phoenix Public Market provides very low-cost opportunities to promote products, establish revenue, and expand micro-businesses.  Along the way, they learn, perhaps make a few mistakes and grow in a low-risk environment.   Today, 45 vendors who started at the Phoenix Public Market now have products that can be found in major grocery stores and restaurants throughout the Valley.

In May, the Market will celebrate the grand opening of a new restaurant by St. Francis owner Aaron Chamberlin in the space that formerly housed Urban Grocery.  The restaurant is adjacent to the open air Market which supports over 100 micro businesses, many of whom will be selling products to the new restaurant.

Despite having to close the indoor Urban Grocery store last May, the open air Phoenix Public Market remains one of the Valley’s leading advocates for and tactical supporters of small business and has continued to grow and flourish.

Even with the setback and the financial challenges it generated, we were able to hold firm in our mission to create opportunities for small businesses that may not be able to open storefronts because of the cost.

Among the reasons we were able to maintain our focus and continue moving forward was the consistent and stalwart support from groups like the City of Phoenix and Bank of America.  The City of Phoenix has been a large supporter from a capital standpoint in building out the open air Market parking lot.  Bank of America was among the first to invest in the Phoenix Public Market with a three-year $25,000 grant and then stepped up with another $15,000 right after the grocery closed when we needed it most.

The impact of those efforts will be reflected long-term and locally. To date our micro businesses have sold over $7 million in local products.  Their support and our ongoing ability to provide opportunities for small businesses will create jobs and generate revenue, taxes and consumer traffic that will, ultimately, contribute to a stronger, more vibrant community.

Those benefits pay dividends to all of us.

 

Dan Klocke is Vice President, Development, for the Downtown Phoenix Partnership (www.downtownphoenix.com).  For information about the Phoenix Public Market, visit www.foodconnect.org.

Rigid Industries

With CRE Financing Up 26% in 2012, Rigid Industries Uses Funds for Expansion, Growth

 

Financing of commercial real estate purchases using SBA loans in Arizona was up 26% in calendar 2012 compared to 2011, according to CDC Small Business Finance, a local leader in SBA lending.

For calendar 2012, $176M in financing was approved with 137 SBA-504 loans to help small businesses purchase commercial/industrial buildings. In 2011, $139M was approved through 117 SBA-504 loans.

Chris Bane

Chris Bane

“Small business owners need to realize that commercial real estate inventory is getting scarcer with the help of sustained low interest rates,” says Chris Bane, senior commercial loan officer for CDC Small Business Finance. “People are coming off the sidelines to purchase their own building, grow equity rather than pay rent and stimulate job growth.”

One of these businesses is Rigid Industries, a company developing, manufacturing and distributing LED lighting for a variety of power sports, military, farming and off-road vehicles.

Its recent SBA-504 loan will fund expansion into a second commercial building in Gilbert. Rigid Industries attributes this growth to increased government business and international sales. Approximately 48% of revenues are international with 52% being domestic.

“Acquiring this new facility will increase our operating footprint from 15,000 to more than 60,000 SF, helping us better manage new manufacturing lines, improve our inventory control, as well as more timely distribution of finished products,” explains Jason Christiansen, president of Rigid Industries.

“Over the next five years we expect to see our business grow by almost 40%. In order to sufficiently support this growth, we need to have more space not only for increased inventory and product development, but also for the new people we plan to hire and bring on board.”

Nearly 2,000 jobs are projected to be created in Arizona as a result of SBA-504 financing approved in the last 12 months. CDC Small Business Finance approved 38 SBA-504 loans for more than $58M in financing in 2012.

The 504-loan program was created by the SBA for the specific purpose of financing long-term fixed assets such as commercial real estate and equipment with economic life of 10 years or greater. The current SBA-504 rate is under 5%.

 

 

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National Bank of Arizona Hires New Business Banking Manager

National Bank of Arizona (NB|AZ) announced the hire of new business banking manager, Ward Hickey. Hickey has more than 25 years of experience in the Arizona banking industry, specializing in entrepreneurship, business development and small business administration (SBA) lending.

“I am thrilled to join the NB|AZ team,” Hickey said. “I’m looking forward to expanding the small business products group and developing mutually beneficial partnerships for the bank and the companies we serve.”

In his new role as business banking manager, Hickey will focus on growing deposit and lending products in the SBA department, reinforcing the strong commitment NB|AZ has to fueling the entrepreneurial spirit of Arizona. He will work directly under Brent Cannon, executive vice president and director of community banking, managing a small team of bankers at the NB|AZ Corporate Headquarters at the Biltmore.

“We are extremely pleased that Ward has joined the team at NB|AZ,” Cannon said. “His specialty in the small business segment, and specifically SBA guaranteed loans, will add considerable value to our organization. Under Ward’s leadership, NB|AZ will continue and improve our products and services to small businesses throughout Arizona.”

Prior to joining NB|AZ, Hickey held several executive positions and shared his expertise with various local and national banks, including Heritage Bank, Wells Fargo and Alerus Bank and Trust, among others. Over the course of his career, Hickey has procured and funded more than $500 million in SBA and commercial loan volume.

Hickey has been recognized with many awards for his exemplary work, including the 2006 SBA Financial Services National Champion of the Year, 2000-2003 SBA Arizona Small Business Banker, and the 2000 Southwestern Business Financing Corporation Banker of the Year.

In addition to his professional success, Hickey dedicates a significant portion of his time to giving back to the community through board positions with the Boys & Girls Club of Metro Phoenix and the Arizona State University Dean’s Council.

Lisa Alberti - SBA-504 Loan Program

Valley Franchise Owners Use SBA-504 Refinance Program To Help Reinvest In Businesses

Robert and Mary Perez take advantage of SBA-504 refinance program.

At a time when jobs are hard to come by and many small businesses are cutting back, Robert and Mary Perez are growing their Metro Phoenix businesses and reinvesting in their biggest asset – their employees.

The Perez’s own and operate six Wendy’s franchises and employ close to 120 people. They were recently facing one significant balloon payment on a commercial real estate loan and dealing with a high interest rate on another. They looked into refinancing via the Small Business Administration. CDC Small Business Finance and Alliance Bank partnered to provide the loans.

“The SBA-504 refinance program couldn’t have come at a better time for us,” Perez said. “The two refi loans we received were the perfect solution, offering us a low, fixed rate for 20 years on both properties. The monthly savings now gives us the ability to hire three more mid-level managers at a higher starting salary and increase the staffing hours for our existing employees.”

The new financing enabled the Perez’s to take advantage of a low interest rate, currently at 4.70%, and a low down payment of 10%.

“I know there are more small business owners, especially in Phoenix, who are facing a hike in their current loan payments,” said Lisa Alberti, CDC Small Business Finance loan officer. “Business owners who own their building and facing an insurmountable payment can benefit from this program, but they need to act fast because the program ends September 27.”

The basics of the SBA-504 refinance loan are simple:

  • To be eligible, the small business must be a for-profit company with tangible net worth of less than $15M and after-tax profit of less than $5M.
  • Any small business with a commercial mortgage at least two years old may be eligible.
  • Payments on commercial loan to be refinance must be current with no delinquencies or deferments in the payments in the past 12 months.
  • The eligible small business must currently occupy 51% of the property to be refinanced. The refinanced amount can be up to 90% of the appraised value of the subject property. The required down-payment is 10% of the total loan amount.
  • The program is structured like SBA’s traditional 504 loan program: borrowers work with third-party lending institutions and a SBA-approved certified development company, typically a non-profit organization like CDC Small Business Finance, to obtain financing.
  • Existing 504 loans and government-guaranteed loans are not eligible for refinance.

SBA estimates that as many as 8,000 businesses across the country are eligible to participate in this refinance program, which will provide up to $7.5B in SBA-guaranteed financing that will leverage total project financing of almost $17 billion.

The SBA-504 loan program was created by the SBA for the specific purpose of financing long-term fixed assets such as commercial real estate and equipment with economic life of 10 years or greater.

CDC Small Business Finance’s office is located at 2575 E. Camelback Rd., #450. For more information on the SBA-504 loan program, contact Lisa Alberti at (602) 635-8413 or lalberti@cdcloans.com

Arizona Business Financing

Arizona Business Financing on the Rise

Arizona Business Financing: Even as the economic recovery seems stuck in neutral, Arizona business financing is increasing for both large and small firms.

“At Arizona Business Bank, we have noticed a resurgent, but cautious, interest from commercial clients in fortifying their working capital lines of credit and discussing owner-occupied real estate plans,” said Toby Day, president of Arizona Business Bank, which is part of CoBiz Financial, a $2.4 billion financial holding company based in Denver.

Of the bankers asked, all pointed to the bargains available in the commercial real estate industry, particularly the office market, as an impetus for businesses requesting financing.

“This year, the primary requests for financing are coming from businesses that have decided to take advantage of the market to buy buildings or, given their equity position, to refinance their building to take advantage of the low interest rate environment, including some who are taking advantage of the (Small Business Administration’s) new refinance program,” says Dee Burton, senior vice president, regional manager for Alliance Bank of Arizona.

According to a Phoenix Metro report from the brokerage firm of Cassidy Turley BRE, the vacancy rate for the office market stood at 28.3 percent during the first quarter of this year, up from 28 percent at the end of 2010. With vacancy rates still rising in the office market, business owners are finding prices that were unseen during the building boom.

“Current low rates seem to favor leasing, however, decreases in real estate values suggest opportunities to purchase the building at less than historic replacement costs,” Day says. “These factors, coupled with a low fixed-rate environment and increased bank willingness to lend have created a favorable financing arena.”

Depreciation changes included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, and the Small Business Jobs Act also are spurring businesses to pursue loans. According to Deloitte, under the two laws all qualified property acquired between Jan. 1, 2008 and Sept. 8, 2010 has 50 percent bonus depreciation; the bonus depreciation for qualified property acquired and placed in service between Sept. 9, 2010 and Dec. 31, 2011 is 100 percent; and for qualified property acquired and in service between Jan. 1, 2012 and Dec. 31, 2012, the bonus depreciation is 50 percent.

“With the bonus depreciation incentives coming from the Small Business Jobs Act, we’re starting to see more requests for equipment financing particularly in health care, such as MRIs, and dental and optical equipment,” Burton says.

Depreciation laws notwithstanding, a number of companies are seeking financing to replace equipment — purchases that have been deferred in some cases since 2008.

“Demand for equipment financing is also increasing in many sectors due to economic conditions moderating and slightly improving and companies being unable to defer capital expenditures for improved efficiencies, replacement needs and near-term projected growth,” says Scott Schaefer, president of Meridian Bank.

Fattening up lean inventories is proving to be another incentive for companies to seek new sources of financing.

“During the downturn, (businesses) were able to generate cash by shrinking inventories and collecting accounts receivable,” says Dean Rennell, Wells Fargo regional president, Arizona Business Banking. “That cycle is reversing now, creating a need for financing.”

Despite signs of improvement, Brent Cannon, executive vice president and director of Metro Banking at National Bank of Arizona (NB|AZ), says loan demand remains tepid due to economic uncertainty and the “weakened state or quality of loan applicants.” He added that the bank forecasts loan demand will “remain somewhat soft in 2011” until the economy shows more significant recovery and unemployment numbers drop.

While the slow economic recovery is causing many businesses to shy away from asking for loans, Day at Arizona Business Bank says banks also have some soul-searching to do.

“Industry wide, banks have been somewhat introspective and the calling efforts (planned sales calls) on clients diminished,” he says. “According to industry trade groups, the number of calls to clients over the past three years has been the lowest since the late 1980s. Increased calling efforts by Arizona banks will be mirrored by decreasing loan problems for the banks — both of which will drive renewed growth in our market. We are optimistic for the mid- and long-term future for our state.”

For more information on Arizona Business Financing, please visit: www.sba.gov

Arizona Business Magazine July/August 2011

Big money tight times 2008

Big Money, Tight Times-SBA Loans Can Help

By Don Weiner

It may be true that numbers don’t lie, but they don’t always tell the whole story. When the 2008 fiscal third quarter ended June 30, statewide Small Business Administration-guaranteed lending showed a 25 percent decline from 2007 in both total loans and dollars lent, according to the Arizona District Office.

big money 2008

In fact, District Director Robert Blaney says numbers have been dropping throughout the fiscal year, which is indicative of a slowing economy and business owners holding back.

“I think that we’re feeling the effects like everybody else,” he says. Even active SBA lenders have noticed a slowdown.

“The customers are not expanding as much,” says Dee Burton, an Alliance Bank of Arizona senior vice president dealing with SBA and commercial lending. “The customers are, you know, a little bit leery and they’re not expanding their business. So, yes, that has impacted the number of requests that we get to look at, simply because most of the customers are not in high-growth mode.”

Yet a closer look at the SBA’s third-quarter numbers shows some positive trends. Veteran lending jumped almost 70 percent. Rural lending dollar totals were up 93 percent. And loans for start-ups increased 147 percent.

“When the angels cry, sometimes they also sing,” Blaney says.

The upshot for small-business owners is that if they need money and can meet certain requirements, financial help is available.

“Here at Alliance Bank, we look at these type of slowdowns, if you will, as an opportunity to help people get a loan to expand and grow with them,” Burton says. “We’re definitely still in the lending process.”

Thankfully, business owners have no better friend than the SBA. It provides resources for those starting new businesses or expanding existing ones. And it has programs for businesses in need of capital.

When it comes to the financial side, it’s important to be clear: The SBA is not a lender. Instead, it works with banks, credit unions or other entities that make and administer loans. The SBA backs up loans with guarantees, which can run as high as 75 percent to 85 percent depending on the amount borrowed and the type of loan.

“For us, it’s a critical program,” says Lori Stelling, vice president and SBA lending manager for National Bank of Arizona. “We can serve so many more customers by givingthem a loan with an SBA guarantee, because the loans that we do under SBA we would not be able to do conventionally. And there’s a number of reasons for that. If somebody doesn’t quite meet our conventional cash-flow requirements, under SBA we can give them a longer term than we can conventionally.”

“For lenders, I would say SBA is a critical part of what we do.”

The SBA has several different loan programs.

The most common is the 7(a) loan, which serves a range of business financing needs with a maximum amount of $2 million. Another is the SBAExpress program. It makes smaller loans available, but the SBA only offers a 50 percent guarantee. One of the newest is the Patriot Express Initiative, a program that helps veterans and others in the military community with funding and training. Established businesses in need of long-term financing for major fixed assets can turn to the 504 program.

Not all active SBA lenders participate in all programs. Some specialize in 7(a) loans; others offer SBAExpress loans as their primary product. They also have varying restrictions and minimum loan amounts. Many lenders refuse to offer loans for start-ups. Also, only certain active lenders are approved for certain programs, such as Patriot Express. And some are given special status. Especially active and expert lenders qualify for the Preferred Lenders Program, which equates to a quicker turnaround on SBA loan applications.

Visit the SBA’s Arizona District Web site at www.sba.gov/az to find a completelisting of statewide lenders.

The SBA loan process is not that complicated. Take your proposal to a lender and, according to Blaney, if the lender is unwilling to do a loan without an SBA guarantee, they will deal with the agency’s loan processing center.

“It’s as simple as that,” Blaney says. “You have to fill out a couple of more forms for us. I mean, it is the government, we do have a form or two. But it’s not an arduous process. And it has been severely streamlined over time.”

cover october 2008

Before taking that step, however, Arizona small-business owners may want to take advantage of two other SBA programs: SCORE and the Arizona Small Business Development Network. Their experts can assist with business plans and help you understand lender requirements.

John Alig, branch manager and a counselor for the East Valley SCORE chapter in Mesa, says this may mean passing out what a fellow counselor calls “reality cookies.”

“Sometimes that includes telling people things that they don’t want to hear,” Alig says.

He warns that business owners who lack a proper credit rating, collateral and capital do have one thing: a big problem.

www.sba.gov/az
www.alliancebankofarizona.com
www.nbarizona.com

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Credit Unions Face The Future & Ride Out The Current Economic Storm

Beginning in November, credit unions across the nation will launch a celebration marking 100 years of their not-for-profit, cooperatively owned financial institutions operating in the United States.

Arizona Business Magazine, September 2008What may be surprising for some about that 100-year mark is a realization that credit unions have just lately — maybe within the past 20 years or so — become more visible within their communities. That’s largely because of the growth they have experienced, with more and more consumers becoming convinced that credit unions offer a superior, straight deal for themselves and their families.

With more than 90-million members nationwide, and about $825 billion in assets, credit unions have become much more prevalent within the working population of the nation as a source of loans, a safe harbor for their savings, and an innovative financial institution that meets the needs of their member/owners.

But, make no mistake — much has changed in 100 years, particularly in terms of how products and services are delivered, as well as expectations by consumers of services from their credit unions. ATMs, debit cards, online banking, credit cards — all are items credit union members of 100 years ago could scarcely have imagined.

Today, nearly all credit unions offer at least some of these services to better assist their members and to meet their high expectations.

What hasn’t changed at credit unions, however, is their philosophy and structure — a key difference between credit unions and other types of financial institutions, particularly banks.

For one thing, banks are owned by investors, either privately or as stock-held organizations. Credit unions are entirely owned by their members, cooperatively.

Secondly, banks exist to maximize profits for their investor/owners. Credit unions exist solely to maximize financial services to their members.

To put that difference into context, consider the subprime mortgage crisis that has ravaged our economy, locally and nationwide. By their very nature, credit unions largely avoided the crisis. Credit unions, which largely hold on to their mortgage loans rather than sell them off (70 percent of credit unions nationwide do exactly that), made loans to members that they could pay back — especially taking into consideration a member’s ability to pay back the loan.

It is no secret that in the current economic downturn, many individuals have found themselves backed into a corner from the subprime mortgage crisis and a wide variety of other unfriendly designer loan products. Fortunately, credit unions have honestly established their presence for serving their members. Remaining removed from other lending institutions has only worked for the best interest of their members.

This isn’t to say that credit unions across the country have not faced some “collateral damage” from the subprime crisis. Members are having trouble making payments on credit union loans because of an expensive subprime mortgage obtained from other lenders, or because some members are losing their jobs in today’s weak economy. But credit unions went into this with very strong balance sheets, and will still be in very strong shape when it’s all over.

Further, consumers can be assured that their money is safe when it is saved in a credit union. Just as the Federal Deposit Insurance Corp. (FDIC) does for banks, the National Credit Union Administration (NCUA), an agency of the federal government) insures a person’s savings to at least $100,000, with higher total insurance coverage available if the member has a combination of individual, joint, trust, payable-on-death and other types of accounts. In addition, there is separate insurance coverage of up to $250,000 for individual retirement accounts.

Today, credit unions offer a wide range of financial services, either because their members expressed an interest in having those services or because the credit union identified services that would best serve their memberships.

Yet, there are limits on what a credit union can do. In fact, credit unions are among the most highly regulated of all financial institutions.

But the changing realities of their members’ lives require credit unions to be as flexible as possible in the services they offer. Credit unions don’t yet have the complete flexibility they need, but are working with the Congress and state legislatures to allow them to be more limber in providing services to members.

One area in particular is business lending. Even though a number of credit unions came into being in the early 20th century, specifically to provide business loans to their members (fishermen, farmers, cab drivers and others), credit unions today are tightly regulated in this area.

Nevertheless, business lending is becoming for some credit unions an important part of their lending portfolio.

Much of the business lending at credit unions is driven by the members themselves. They know and appreciate the solid programs credit unions have offered on auto and home loans. Further, before the present economic slowdown, small businesses were already having trouble finding credit from traditional sources.

A 2004 research study by the Small Business Administration found that credit access for small business had been significantly reduced from traditional sources, and that non-bank sources of funding are becoming increasingly important, especially in areas dominated by banking institutions that have “consolidated,” that is, large banks merging with or buying up smaller banks.

What further attracts members interested in business lending and consumer financial services is that credit unions have a mission of serving “people from all walks of life.” In fact, today just about anybody is eligible to join a credit union somewhere (but not everyone can join just any credit union — you must fall within its “field of membership”). That’s important for credit unions, because, as cooperatives, they need members from all income segments: Those who have funds to save in order to bring deposits into the credit union, and those with a need to borrow funds to finance their needs in life.

It is this cooperative structure, and our mission to maximize financial services, that compels credit unions to offer a better deal on savings and loans. In fact, the Credit Union National Association’s Web site reports each day just how much of a better deal credit unions offer at www.creditunion.coop

For their first century in America, credit unions have seen a great deal of change, particularly in how consumers expect to obtain and receive their financial services.Arizona Business Magazine, September 2008

But what has not changed in the last 100 years is the cooperative structure, spirit and philosophy of credit unions — “people helping people.” We hope to keep celebrating that spirit for the next 100 years.

Steve Earl is president and CEO, and Joy Audet is political communications coordinator for the Arizona Credit Union League, which represents credit unions operating in the state. For more information, visit www.azcreditunions.org.

Public Policy

Hispanic Chamber Takes On Key Issues

Matters of Public Policy

Hispanic chamber takes
on key issues

 

From immigration reform to healthcare affordability, the Arizona Hispanic Chamber of Commerce is once again wading into the turbulent waters of public policy and its already tackling big issues. The chamber’s public policy committee became active again last September and its 25 members have been busy the past several months educating themselves on state and federal issues.

public_policy“As an arm of an organization that represents primarily small Hispanic businesses, the committee explores issues that affect chamber members on a daily basis and their ability to grow and thrive,” says Jessica Pacheco, committee chairwoman and chamber board member and treasurer. “Not all Hispanic small businesses view these issues the same. We have a lot of debate and dialogue.”

Immigration Reform
So far, the Hispanic chamber has let other chambers take the lead on immigration reform, but Pacheco says her committee has its opinions on one facet of this issue—penalties for employers who hire undocumented workers. The committee has no problem with employer sanctions as a concept but opposes them as a “stand-alone issue” outside the context of comprehensive immigration reform. In June, Gov. Janet Napolitano vetoed a House immigration bill that included employer penalties. Its membership favors comprehensive immigration reform and the Hispanic chamber prefers that Congress address this issue, Pacheco says. “I can’t imagine a more difficult business environment than with each state having its own immigration laws.”

Procurement Opportunities
This fall, the chamber plans to help Arizona launch a “disparity study” to demonstrate how the state awards contracts for goods and services. It wants small business to garner a more equitable share of state procurement dollars, possibly an additional 10 percent. The chamber teamed with a variety of organizations to raise funds to pay for the study. The U.S. Department of Transportation is expected to provide $450,000 and a like amount must be raised locally through a public-private partnership, according to Pacheco. The first meeting with local donors was slated for June 14.

Federal Estate Tax
“There is a misconception that the federal estate tax affects very wealthy Americans, but if you look at the structure of the tax, it really hurts small businesses, especially Hispanic small businesses where 90 percent of them are inherited by family,” Pacheco says. The chamber believes the tax should be eliminated and committee members are communicating with Arizona’s congressional delegation.

Healthcare Affordability
Every small business grapples with the cost of providing health insurance, Pacheco says. “We would like to see a reduction in the cost of health insurance plans offered in the small group market. We also want to increase the number of workers in small business that have health insurance.”

Tax Relief
AZ Business MagazineThe chamber supports tax relief for small business. It favors reduction in dividend and capital gains taxes and supports accelerated depreciation for equipment and software. “Software depreciation is critical because small businesses often have to purchase very expensive software for accounting and networking,” Pacheco says.

Access to Capital
The Small Business Administration provides considerable capital for small businesses and the chamber is keenly interested that the SBA continuing to receive adequate funding. “The SBA has been a great partner and we want to be sure our membership knows what is out there and available to them,” Pacheco says.

 

www.azhcc.com

 

Arizona Business Magazine Aug/Sept 2006

 

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