Getting funding from a credit union vs a traditional bank...

Has anyone recently had a tough time financing their business?  I am considering starting a business in the near future.  I have read the "credit crunch" is affecting small businesses in both starting up and expanding.  One discussion board I was reading suggested going to credit union for a loan instead of a traditional bank.  I was wondering if anyone has had any luck with credit unions and if it should be an option I consider?

Hi Kelly:

I haven't used a credit union but I have used credit cards.  They are easier to get (i.e., the application process is straight forward) but you do have to watch the interest rates as they tend to be much higher than for personal cards.  It's an option to consider, though, as you investigate which direction to go in.

Hope that helps,

Deb

Deb,

I never thought of using credit cards.  It could definitely be useful in certain types of business.  I can see how credit cards would work if you have a business that requires you to buy supplies in advance and then after completing a job you would be able to pay it off.  For businesses where larger start-up capital is needed and the return on your business takes awhile to grow it may not be the best fit.  As you mentioned the interest rate may be high and would not be desirable if you needed to take years to pay off the balance.

Has anyone else had any experience using credit cards to start their business?

 Most banks will require a 2 year tax history from a company before approving a commercial loan.  However, if you have good credit, my bank offers 12 months, zero interest, on any purchases or balance transfers for the first year.  You can not beat that if you just need to make some equipment purchases or initial investment on the company.

Maria,

Wow, zero interest on any purchases and balance transfers for a full year is a really good deal.  Like you said, if you only have to make some equipment or supply purchases to get started you really can't beat that.  This is definitely an option someone should consider if they have minimal start up costs.  Thanks for the reply!

Kelly

I came across this article, "8 places to get financing", and it describes some alternative places to look to get financing for your business other than banks.  It's becoming increasingly difficult to get financing so it's good to have other options to explore in case a bank turns you down.

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Though the process of getting loan from traditional bank is little tedious but the loan interest rate is lower than credit union loans. Also, traditional banks offer more flexibility in repaying.