Michigan Credit Unions Help Small Businesses Weather the Storm: Pledged SBA PPP Loans of $750 Million Reach 7,500 Small Businesses,150,000 Employees
More than 90% of credit union lending is focused on consumer borrowing needs, including mortgage loans, automobile financing and credit card borrowing. During the current economic crisis, the special needs associated with these loans have been extraordinary as virtually all credit unions are deferring loan payments, delaying foreclosures and repossession activities, waiving fees and making special emergency loan funds available – all based upon need and individual customized requests.
Despite this consumer focus, Michigan credit unions are also stepping up to help small businesses during the COVID-19 pandemic, providing financial relief and guidance to help member owners manage during uncertainty. The primary areas of community assistance have been hardship loans, relief options and assistance understanding and applying for federal relief programs.
Immediate relief options have consisted of voluntarily deferring payments on business loans, waiving fees, offering skip-a-payments and, on a case-by-case basis, suspending foreclosure and repossession processes. Again, this applies to both consumer mortgage loans and outstanding small business borrowings. Credit unions are also processing unprecedented volumes of consumer and small business real estate loan refinances in an unprecedented low-rate environment.
While capital available for new loans has been stretched to the limits due to the unprecedented borrowing needs, most credit unions have seen borrowing capacity helped by a large influx of deposit funds as consumers and some small businesses have seen federally insured credit unions as a safe haven during turbulent market conditions.
The majority of credit unions’ small business service efforts have focused on the Small Business Administration (SBA)’s newly launched Paycheck Protection Program (PPP) loans to provide small businesses, independent contractors and others with the financial resources necessary to cover critical business expenses. Key to the program, the loan will be forgiven if used for prescribed percentages on payroll (75%), interest on mortgages, rent and utilities.
Consistent with their social mission and ongoing community reinvestment initiatives, Michigan credit unions have been taking full advantage of their eligibility of the program, as well as offering internal hardship loans. So far, an estimated 50 Michigan credit unions are closing loans on $750M in funds to assist local business owners. These funds will assist more than 7,500 Michigan small businesses and their approximate 150,000 employees. Most credit unions are taking applications and closing loans despite the trouble and frustration with the SBA’s current system. Unique to credit unions is the smaller average loan size of approximately $100,000. These businesses have been particularly challenged in gaining access to the emergency payroll loans.
“Michigan’s credit unions have been truly inspiring during this fast-paced and unprepared PPP rollout by the SBA,” said Michigan Credit Union League President/CEO Dave Adams. “Despite the lack of clear guidance and overall readiness by the SBA, credit unions have worked quickly and proactively to process applications and to prepare for loan funding. Due to capacity restraints and concerns about fraud exposure, most credit unions and banks have focused on existing client relationships and needs. But some are stretching to serve new small business borrower needs as well.”
Some credit unions, like the Saginaw-based Team One Credit Union, already have 60 loans in the pipeline to assist small businesses and have allocated $10 Million internally in total assistance. At the time of this report, Frankenmuth Credit Union told MCUL it had processed four internal loans for local businesses in the amount of $10,000 for immediate needs and expects to fund several more.
Frankenmuth Credit Union CEO Vickie Schmitzer said the credit union is talking to businesses every day and owners’ number one question is, “How will we ever make it?” This is compounded by serious doubt that May 1, when the current shelter-in-place order lifts, will be the end of the crisis.
Frankenmuth Credit Union also services many tourist-based businesses, and Schmitzer said these owners are concerned with the coronavirus’ lasting impact on tourism, “There are a lot of unknowns right now and this causes fear.”
When asked why it’s important for Frankenmuth Credit Union to support small businesses, Schmitzer responded, “They are our friends and neighbors. They support local sports teams, schools and non-profit organizations to improve all our lives. They employ our family members and encourage others in our communities to be creative and find solutions not yet met with their entrepreneurial spirit. If credit unions don’t support the small entrepreneur, who will?”
United Federal Credit Union, based in St. Joseph, has also been in daily contact with business owners, providing as much clarity and information as they can regarding SBA’s PPP loans and Economic Injury Disaster Loans (EIDL).
The credit union, which was named 2018’s Credit Union Lender of the Year by the U.S. Small Business Administration’s Michigan District Office, has been holding one-on-one appointments with member owners, walking them through their unique situations.
“These are the times when credit unions should be shining and stepping up to help members and the community,” said United’s VP of commercial lending, Tony Mandarino. “As credit unions, we should be an educational professional that they can count on to point them towards the best resources for their specific situation. At United, we have very strong relationships with our members and they’re looking to us to be that partner in their toughest times.”
Since the beginning of April, Astera Credit Union has assisted several of their business account holders with the PPP application process. In their first week, 22 of the applications they assisted on have been approved by the SBA. And more importantly, between those 22 businesses that have been approved, more than 278 employees will be positively impacted.
“Our local economy is taking a hard hit right now, and we recognize that one of the hardest hit groups is going to be small businesses and their employees. We are committed to doing everything we can to help support our members who own businesses in the communities we serve,” said CEO Martin Carter. “I couldn’t be prouder of our staff, our leadership team, and our board of directors for their commitment to helping members. It’s a true testament to the culture Astera has built and I want to thank the Astera team for their commitment to living our values as we all face these stressful times.”
Honor Credit Union, serving Michigan’s southwest area, has noticed a change in member business owner’s requests since the beginning of the pandemic. What started as requests to help get through the short-term has changed to help construct a re-opening plan, and how to weather growing concern about what that will look like.
“We got very creative very quickly on ways to provide safety nets for our businesses before any government programs were available,” said CEO Scott McFarland. “The possibility for debt forgiveness and a low interest rate on the remaining portion of the [PPP] loan not used for payroll is critical to support these local businesses as they try to keep people employed.”
So far, Honor has reported 237 submitted PPP applications, with a total of 401 in the pipeline, totaling $18.7M in assistance. McFarland said PPP loans have provided some sense of peace even among the early program changes and other unknowns in its rollout, but he worries about permanent damage done to businesses if the stay-in-place order continues into May.
“These are difficult times, but we are fighting through them together,” continued Honor’s CEO. “As a member-owned cooperative, we never want to take for granted what small businesses do for us and our communities. It is essential to support them because they support us.”
Isabella Community Credit Union is helping small businesses access and navigate the many relief options available, including the Michigan Small Business Relief Program grants and loans, the EIDL program and, most prevalently, the PPP loan application process.
The credit union is submitting applications for them and are collaborating with an experienced SBA-lending credit union (and its CUSO) to provide the best available lending assistance for member business owners.
ICCU President/CEO Jenny Hoyle said small business owners have communicated their concerns about how long it will take to return to business as usual, even after the executive orders are lifted.
“A few feel they have enough reserves to weather the storm; however, for many, they are concerned about their ability to remain in business with this loss of momentum and revenue,” continued Hoyle. “They are worried about their employees who are currently out of work, how quickly they will be able to put them back to work and whether their employees will return to work for them when that time comes. Related to that concern, they are worried that the SBA PPP loan funding will be exhausted before their business receives funding.”
Further concerns from business owners surround whether the SBA’s PPP loan funding will be exhausted before their business receives funding, which makes additional support from credit unions even more paramount.
“Small businesses are part of the lifeblood of our community. When our small businesses thrive, our communities and families thrive, when they suffer, we all feel the effects,” said Hoyle.
Small business owners can find information regarding small business assistance, including a tool to find SBA-approved credit unions here at CULinkMichigan.com.
Credit unions large and small, from the U.P. to every corner of the lower peninsula, are stepping up to help small businesses and consumers alike with their most pressing financial service needs. Some of the largest producing SBA PPP credit union lenders in Michigan have included MSU Federal Credit Union, Lake Michigan Credit Union, United Federal Credit Union, Consumers Credit Union, Frankenmuth Credit Union and Honor Credit Union, as well as Credit Union Service Organizations and smaller credit unions across the state.
All credit unions are serving their extraordinary consumer borrowing, savings and payments needs as well.
