Credit unions: financing for and by entrepreneurs
By joining a credit union with your business, you can invest and borrow money together with other entrepreneurs without the involvement of a bank. Read how a credit union works and what you should consider if you want to borrow money through a credit union.
What is a credit union?
A credit union is a cooperative of entrepreneurs. Members contribute funds to provide business loans to other entrepreneurs within the same region or sector. A credit union is a non-profit organisation and operates based on shared interests.
Members of a credit union help each other not only with financing, but also with coaching. The experience of other entrepreneurs provides you with extra support for the growth and development of your business.
Credit unions usually focus on specific sectors or local business networks.
Who is a credit union for?
A credit union is particularly suitable for entrepreneurs who:
- find it difficult to secure a loan from a bank or traditional lender
- run an SME
- are looking for a loan of between €50,000 and approximately €250,000
- are open to coaching and learning from other entrepreneurs
- operate in a region or sector with its own credit union
How does a credit union work?
Members contribute money
A credit union uses money that entrepreneurs contribute together. This can be done via:
- membership certificates (a member then owns a small share of the credit union’s assets)
- bonds (a member lends money to the credit union)
- organisations that invest professionally, such as investment funds, pension funds, asset managers, and institutional investors
Investing together in their own sector or region
The credit union lends money to other members, without the involvement of a bank. In this way, entrepreneurs invest together in their own sector or region. They share the risk of the loan.
The term of a loan is usually 1 to 10 years.
Coaching by experienced entrepreneurs
Many entrepreneurs can learn from someone with experience. In a credit union, you are assigned a coach from the network of members. This entrepreneur knows the trade and understands what is involved in running a business. The coaching provides you with extra support and increases the likelihood of your plans succeeding.
The pros and cons of a credit union
- Borrowing without a bank
- Lower interest rates than with commercial lenders
- Knowledge of your sector or region
- Coaching + network of experienced entrepreneurs
- Quick decision-making
- Not-for-profit
- You must become a member and pay for membership
- You must meet the credit union’s conditions
- Usually you cannot borrow more than €250,000
- Not every sector or region has a suitable credit union
- In some credit unions, the investing members share the risk
You can find more information about credit unions in the Netherlands at the Vereniging Samenwerkende Kredietunies and the Kredietunie Nederland (both links in Dutch).
How to apply for a loan from a credit union
Would you like to become a member of a credit union to finance your plans? Then take the following steps:
- Check whether there is a credit union in your sector or region (for example, via a sector organisation)
- Read the credit union’s terms and conditions. Check the target group, rules, and costs
- Apply for a loan via the credit union’s website
If your application is approved, you will become a member and receive the loan.