The Scoop on Credit Union Short-Term Loans, Plus 4 Great Alternatives

Meredith Turits

Managing Editor at Fundera
Meredith is Fundera’s Managing Editor. She oversees editorial, and also writes about small business and finance. Meredith has contributed to publications including the New Republic, Rolling Stone, Vanity Fair, ELLE, The Paris Review Daily, and more.
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If you’re a member of a credit union, you might have heard that these financial institutions offer competitive rates for business financing. And that’s true—the best credit union business loans, including credit union short-term loans, are among the lowest-interest financing options around.

And, if you don’t have a membership at a credit union, and you’re looking to secure a short-term loan, you might be wondering if it’s worth it to go seek out a credit union to join. That’s a good question, too.

Entrepreneurs looking for short-term small business loans are in a better position each day as the number of options for small business financing grows, especially with the emergence of alternative lenders.

So, with that in mind, let’s look at the best credit union short-term loans, and figure out whether or not they’re a good bet for small business owners. And what other alternatives are on the table, too.


What’s a Credit Union?

It’s a simple question—but don’t feel silly if you can’t answer it. A lot of people can’t!

Essentially, a credit union is a financial institution that acts like a cooperative in which members are both contributors and shared owners of the bank. It’s a group you have to join or be eligible for, and that usually happens based on your employer, family, geographic location, or other qualifying criteria.

There are also several public credit unions, which is great news for small business owners looking for solid traditional financing opportunities. Many of these credit unions offer membership if you make a small donation to a specific charity or join an organization associated with the credit union. We have a list of public credit unions if you want to browse.

Credit unions are generally more community-oriented and less profit-serving than traditional banks. Members of a credit union contribute to a pool of funds the other members can lend against. Most credit unions offer many of the same services as banks, and often prioritize customer service to keep members smiling.

One of the many great things about credit unions is that those who belong to the credit union contribute to the greater financial good of the whole group, as opposed to profit for the bank itself. So, when a member is in need of a financial product, like a credit union short-term loan, for instance, the union can often offer advantages over lenders like traditional banks. (More on that in a bit.)

Why Look Into the Best Credit Union Short-Term Loans?

If you’re looking into short-term loans and you happen to be a member of a credit union, you’ll certainly want to see what’s available to you. That’s because credit unions are not designed to maximize profits for their business, so they can often offer superior loan products to qualified candidates with competitive interest rates and very minimal fees.

Let’s look at short-term loans as a whole, and then get specific to how they function specifically in the context of credit unions.

Short-Term Small Business Loans: An Overview

For someone looking to meet an immediate financing need, a short-term small business loan could be an option. Short-term loans are designed to meet more urgent financing needs. These business loans can be a flexible financial tool to better manage cash flow, deal with unexpected needs for extra cash, or take advantage of a  business opportunity that quickly presents itself.

A short-term loan operates somewhat like a traditional term loan, but—perhaps obviously—with a shorter repayment timeline. So, as a borrower, you pay back the money, plus interest, with daily or weekly payments over three to 18 months.

If you’re looking to qualify for a short-term business loan, you’ll find different specific qualifications depending on the lender with whom you’re working. However, lenders generally expect that you’ll have been in business at least a year, have a credit score above 550, and be pulling in at least $50,000 in annual revenue.

You’ll generally be able to secure between $2,500 to $250,000, depending on your eligibility profile. Interest rates here start about 10%.


Short-Term Loans at Credit Unions: A Few Differences

Not-so-fun fact about short-term loan interest rates: They’re often higher than traditional loan rates. That’s primarily due to looser qualification criteria, lower amounts, and shorter term lengths.

A strong positive of a credit union short-term loan is that qualified candidates can potentially snag lower interest rates. And, the best credit union short-term loans also typically have lower fees associated with loan processing than others, too.

Why? It’s in part because credit unions are “not-for-profit”—which is distinct from “non-profit.” It’s still a business in that it doesn’t rely on donations to survive. Instead, the goal of the institution is not to maximize profits, but to simply make ends meet to remain in existence. So, when you’re not looking to pass onto shareholders, and instead please the community, you’re quite a bit more flexible.

Here’s the main thing, however. Since any credit union loan—or financial product at all—comes with much more favorable terms for the borrower, the lender is going to be more strict with borrower qualifications. Which means that qualifying for a credit union business loan is going to look pretty similar to a bank or traditional lending institution, which asks for more like two years in business and a very strong credit history.

This isn’t always the case, of course—it’ll depend on your own credit union’s specific requirements. So you’ll certainly want to check in if you think your financials are strong enough.

If you are qualified, however, you’ll reap dividends. It’ll be more money in your pocket.

The Best Credit Union Short-Term Loans

Because credit unions are smaller, community organizations, if you take a away one thing here, let it be this—there isn’t one singular best short-term credit union loan. Since loan product offerings, plus their rates and terms, vary from credit union to credit union, the best loan solution is going to be specific to your union, your business, and your goals.

Your specific credit union might offer a short-term loan like you’re envisioning it—a three- to 18-month term loan—but there may be other products worth exploring, too. The best credit union short-term loan for you to accomplish what you need might not be a term loan at all, but rather a more specific financing product. For instance, a business line of credit, or even a credit union credit card, could get you to where you need to be going.

For all of the differences, though, there are commonalities, even if your short-term loan product varies across credit unions. The biggest one: Getting a small business loan from a credit union is hard. Like bank hard. Even a short-term loan.

We mentioned it above, but it’s worth reiterating that to be a qualified loan candidate at a credit union is much like being one at a bank. It’s generally no easier to get a business loan at a credit union than it would be at a bank. Although if you can secure one, you might get more favorable terms.

How to Apply for a Credit Union Business Loan

Securing a any type of short-term business loan from a credit union isn’t much different than if you were to go about it with other lenders. The big thing, of course, is you’ll have to join a credit union if you don’t already belong to one.

In that case, find a credit union you’re qualified to join… and, naturally, join it! Credit unions have vastly different eligibility requirements—some are public, and others are private, as we mentioned—but each credit union will have a page showing eligibility requirements to become a member. If there’s any confusion, definitely give the credit union a ring.

Unlike banks, who’ll work with any member of the general population as long as they’re qualified within the institution’s guidelines, you won’t be able to seek financing from a credit union without first becoming a member.

Where to Apply

Some credit unions are very old school, and don’t offer the ability to apply for a business loan—or even browse offerings—online. In that case, you’ll have to swing into your branch and talk to a representative.

Other, more modern credit unions, like Navy Federal Credit Union’s business loans, are accessible via online portals. So you can browse what they offer, and even see if you’re qualified there.

It’s just the nature of how many of these places work!


Alternatives to Credit Union Short-Term Loans

Although getting a short-term loan from a credit union is a good option for some small business owners, it’s not realistic for many others.

For one, lots of entrepreneurs don’t even belong to credit unions—and don’t have the bandwidth to be able to research and apply to one. And even if they do belong, credit union small business loans are hard to get! So many don’t have the financials to apply.

So, what are your other options besides a credit union short-term loan? Fortunately, there are quite a few out there (and, luckily, they don’t involve heading down to a brick-and-mortar storefront to explore).

Short-Term Loans with Alternative Lenders

Just because a credit union is likely going to require a more substantial list of requirements—such as a couple of years in business and a high credit score—to secure even a shorter term loan doesn’t mean that all lenders will.

In fact, many alternative lenders are increasingly flexible with their requirements for short-term business financing, as long as you’re somewhat in this general ballpark as a borrower:

  • 1+ year in business
  • 525+ credit score
  • $50,000+ yearly revenue

And depending on the interest rate you’re willing to pay, how much money you’re looking to borrow, and the time frame over which you can repay it, you might have more options than you think with online lenders like OnDeck, Kabbage, and more.

The best thing to do is apply and see what you’re qualified for and go from there.

Business Lines of Credit

Maybe a short-term loan actually isn’t the best fit for your business… but a business line of credit actually is.

A business line of credit works very similarly to a business credit card, in the sense that you’ll work with a lender to be approved for a certain amount of cash that you can spend, and you can draw as much of it as you want.

You’ll only pay interest against what you draw. And, oftentimes, the interest rates—which generally range from 7% to 25%—can be lower than credit card APR. That’s great if you carry a balance. And, if you opt for what’s called a “revolving” line of credit, this is a product that’ll re-up every time you pay off your balance in full.

Lines of credit can be a great solution for businesses because they’re often less expensive than short-term loans, but can solve some of the same solutions. And they can happen through online lenders quickly.

Here’s who generally qualifies:

  • 6+ months in business
  • $50,000+ annual revenue

Here’s a great opportunity to get access to capital for new businesses, or for those who need to build their credit.

Equipment Financing

Something else to consider would be an equipment loan. If you were going to use a credit union short-term loan to upgrade your facilities or give your shop a refresh, equipment financing could be a less expensive option.

Let’s first take a look at the general qualifications:

  • Roughly a year in business, sometimes less
  • 600+ credit score
  • $100,000+ annual revenue

But these are just starting points! Why so comparatively open?

Since this type of small business loan is used to secure a specific piece of equipment—let’s say a new computer or a canning line—the equipment is used as collateral to secure the loan. So, if you don’t pay it off, the lender can repossess it. That lowers their risk, which ultimately makes the loan more affordable, and allows more borrowers access to financing.

Interest rates here start at around 8%, and top off at roughly 30%.

Business Credit Cards

You might not have thought of a business credit card, but listen—this can actually work for you.

If the reason a credit union short-term loan isn’t on the table for you is because of either a poor credit score or a lack of credit history, there’s absolutely no better place to start. Spending on a business credit card and paying on time will build (or rebuild) your credit history, proving to a lender down the line that a loan product is the next best step for you.

Plus, there’s surprisingly a lot you can do with business credit cards! If you’re not looking for hundreds of thousands of dollars and you need financing fast, a lot is possible with the right business credit card. It’s just a question of finding your match, whether that’s a 0% introductory APR credit card or a secured credit card.

Plus, you can complete the business credit card application right online.

Credit Union Short-Term Loans: The Bottom Line

If you’re a member of a credit union and you have the kind of business track record and credit history that can score you a credit union term loan, make it happen! Because credit unions are looking out for their members, you can often get priority rates that’ll make your business loan less expensive.

However, credit union business loans aren’t on the table for many small business owners. But don’t fret—because there are lots of options out there, especially with alternative lenders.

The best thing you can do is evaluate what exactly you’ll be using your short-term business financing for, and then get as many offers as possible so you can get the best deal for your business. Even with business credit cards, there’s a place to start!


Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Meredith Turits

Managing Editor at Fundera
Meredith is Fundera’s Managing Editor. She oversees editorial, and also writes about small business and finance. Meredith has contributed to publications including the New Republic, Rolling Stone, Vanity Fair, ELLE, The Paris Review Daily, and more.

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