Looking for few good credit unions - four to be exact

By Denise Wymore, Chair of the Board, CU De Novo Collective

Yesterday I sat in on a presentation of Filene’s Entrepreneurial Ecosystems Incubator led by Horacio Garcia-Korosec, Senior Incubator Manager.

The Small Business Administration reveals that half of new small businesses face closure within the initial 5 years, the imperative of access to credit becomes even more pronounced. It becomes evident that knowing how to run a business is as critical as obtaining credit. Compounding this challenge, minority business owners are disproportionately discouraged from applying for credit (29.5%) compared to their non-minority counterparts (15.8%). This disparity underscores the urgency for credit unions to bridge this gap, not only by providing financial support, but also by fostering an environment that addresses the multifaceted challenges faced by entrepreneurs, ensuring the sustained success.

The US had the third-highest entrepreneurship rate among 21 high-income economies with nearly 1 in 15 adults - 19 percent – in the process of founding a business or have done so in the past 3 !/2 years, but fewer people believed it was easier to start business in 2022 than in 2021 (66% versus 77%).

Satisfaction surveys show that while credit unions consistently score highest as compared to their financial services peers in customer satisfaction. With lending practices, they rank at or near the bottom in the actual share of loans held by small businesses.

Recognizing that small business loans hold a higher risk, Filene Research Institute has partnered with Bridge for Billions. They work with thousands of purpose-driven entrepreneurs to create inclusive, sustainable companies. Simply put, they will make sure that the small business owner has a solid three-year business plan.

How might we bridge the gap between credit unions and these underserved entrepreneurs to create stable ecosystems? Through a learning journey facilitated by Filene and Bridge for Billions. Your credit union will gain the knowledge and tools needed to support local entrepreneurs effectively. This transformative project aims to empower early-stage entrepreneurs and small business owners to enhance collaboration between credit unions and various ecosystem stakeholders, refine measurement tools, and establish sustainable models for ecosystem building that can be applied nationwide.

On this call they gave an example of a typical small business. One was a bakery and the other was a hair salon. Bridge for Billions can help these entrepreneurs with their 3-year business plan that includes a study of their marketplace, their target audience, the competition and their differentiator.

That got me thinking about small credit unions and the advantage they still have with a niche market. That is to say a single sponsor. There are not many left, but Ironworkers USA comes to mind. In 2018 CEO Teri Robinson expanded the field of membership from Ironworkers in the Pacific Northwest to an associational common bond charter which allows her to serve Ironworkers throughout the country and grew from $7.5 million to $93 million in assets. Many would say because of the asset size she needs to merge to survive.

If we continue with this “bigger is better” mindset, we are essentially eating our young. And it makes sense why credit unions would look at a bakery, with a goal of 10 employees, as too high a risk. Does every bakery have to become the ubiquitous Krispy Kreme? A company with a very strong differentiator, “Hot and Now” and eventually ended up selling donuts in gas stations. Is that the measure of success? The number of branches you have?

We need four credit unions to raise their hand to participate in this incubator. It is not a commitment to make a loan to an entrepreneur; instead, it involves joining a cohort of credit unions to walk alongside them as they are guided through the process of developing a business plan and learning from them on how to best support small businesses, leveraging the resources and purpose of the Bridge for Billions platform.

Click here to raise your hand!