As credit unions seek a continued expansion of their membership base, they are beginning to reach into the business sector. What started with simple checking accounts and real estate loans has grown to include equipment loans, payroll services and analyzed business checking for small- to mid-size companies.

Lee Smith, owner of Simpson’s Gardentown Nursery in Jamul, moved his business about six months ago to North Island Financial Credit Union and says he’s discovered a level of customer service that makes him feel at home. Smith does his banking about twice a week and enjoys being on a first-name basis with his merchant teller.

Smith’s business was a kind of test run for North Island. He reports no shortcomings or problems so far in the arrangement. “They weren’t used to that (business) stuff as much as a larger bank,” he says. “They guided us and we guided them. But they step up to the plate all the time.”

NIFCU has provided business services for about a year, and is still ramping up its offerings. “The infrastructure to offer a full line of business services is just coming online,” says Jeffrey Stone, senior vice president of commercial services. For example, account analysis and home banking for business just became available.

As the credit union builds its offerings, it has added equipment leasing, payroll and credit card services. In the past six months it began offering business lines of credit secured by the business assets.

Credit unions have a different feel than a bank. They are not-for-profit entities, and credit union patrons are members not customers. “They buy ownership in the business with their membership fee,” says Karen Harrison, senior vice president of corporate development and marketing for USE Credit Union. “Often membership fees are waived, and we have free checking accounts (with minimum deposit requirements).”

Membership fees can vary between $1 and $10. Applicants must live or work in the community where the credit union has offices. And membership in a not-for-profit business can certainly have its benefits. Banks have to make a profit to keep shareholders happy. Credit unions return any profit to members as higher interest rates on deposits and lower interest rates on loans. Banks charge service fees on most transactions while credit unions offer accounts with little or no fees.

It also can be easier to qualify for a loan at a credit union.

That’s exactly what Harry Thompson discovered. The owner of Torrey Pines Landscape Co. Inc. used to bank at Union Bank, where his business loan application was turned down in spite of sizable deposit accounts. About a year ago, Thompson heard about NIFCU’s entry into business services on talk radio. His interest was piqued, he became a member and he qualified for a loan. “Big banks don’t care about small businesses,” he says. “They don’t want to extend a small business a line of credit.”

Thompson says the best thing about being a credit union member is the personal service. He recently received payment from a client and tried to deposit the check before his client had transferred funds to cover the amount. The credit union called him on his cell phone, was understanding of the situation, and tried again later to deposit the funds into Thompson’s account. “A big bank would never take the time to do that,” he says.

San Diego County Credit Union also offers basic business services with a variety of business deposit accounts and loans. New office equipment and furniture loans simplify establishing or upgrading a business. Business accounts can be accessed online. SDCCU’s auto buying service extends to business members. Car shopping and financing can be done with the assistance of the credit union.

California Coast Credit Union is just beginning to test the waters of business service. Rene McKee, vice president of marketing at CCCU, says although the credit union doesn’t yet serve businesses, it does handle sole proprietor accounts.

An Added Benefit

Credit unions not only offer services to businesses, they offer services for businesses. Smaller businesses have more difficulty offering benefits to employees; “this is where a credit union can help,” Harrison says. “We offer employee programs. It’s like a benefit; the employee gets a free credit union membership because they are an employee of the business.

“Sometimes it’s difficult to offer benefits when you’re a small business. So we try to give them a tool to help them show their value to employees.”

It costs nothing for the business to arrange this benefit. Once the agreement is established, the credit union sends in a representative with a presentation and new-member paperwork. Stone says this is a standard courtesy of most credit unions.

So far, credit unions are treading cautiously into the business services waters. If more customers have the same positive experiences as Lee Smith, banks might find they have a new competitor on the block.