How Credit Unions Help SMBs Get Creative To Navigate Market Uncertainty

Small businesses are turning toward their financial service providers now more than ever, not only for access to working capital and key products to run their business, but also for advisory services and guidance on how to navigate today's volatile market.

It's a difficult moment for the small business community, too, considering the pains of forced store closures, patronate limitations and other pandemic-related factors affecting how a business can operate — or whether it can stay open at all.

Kelli Ellsworth-Etchison of Michigan-based credit union LAFCU says the credit union business model can offer small business owners an advantage over services provided by larger financial institutions. Speaking with PYMNTS, Ellsworth-Etchison offered insight into some of the most strenuous challenges facing both small and medium-sized businesses (SMBs) and their financial services providers today, and why getting creative is the key to survival.

Getting Creative

Small businesses continue to face a brutal market, with Ellsworth-Etchison pointing to limits on capacity and other operating restrictions as some of the toughest hurdles to overcome today. While the Paycheck Protection Program (PPP) was intended to help small businesses by retaining staff, Ellsworth-Etchison said it often had an adverse impact.

"Small businesses were finding that they were having challenges hiring and calling back employees they had to lay off," she said. "In some cases, employees were making more on unemployment than they were working at some of the smaller businesses. And quite honestly, people were very nervous about going back to work in public areas."

There is a delicate balancing act that small business owners must manage today as a result of the pandemic. While hiring and retaining staff is critical, and keeping patronage up is key to healthy revenues, entrepreneurs need to also remain compliant and ensure a safe and healthy environment.

Despite these challenges, Ellsworth-Etchison said she has seen small business owners display impressive resiliency as they get creative with their own business models. From diners opening up parking lots for outdoor patronage to small businesses embracing the eCommerce landscape for the first time, business owners are flexing their entrepreneurial spirits to work through some of the most volatile and challenging times the market has ever seen.

An Agile Business Model

Small businesses weren't the only ones struggling amid the pandemic. Financial service providers themselves similarly found themselves in a challenging situation, and credit unions were no exception.

For LACFU, previously planned initiatives like the launch of a new website and an upgrade of its credit card offering were delayed as a result of the pandemic. One of the biggest challenges when the pandemic hit, said Ellsworth-Etchison, was facilitating PPP loans for small businesses.

"It was clear that the SBA portal for uploading applications fared better for large banks," she said, noting that LAFCU had to upload each application one at a time.

Yet just like its small business members, credit unions had to get creative and persevere. With another stimulus package potentially up ahead, Ellsworth-Etchison said that LAFCU is better prepared to manage an onslaught of demand among small businesses, as well as to take advantage of what she described as the "misstep" of larger financial institutions failing to adequately service sole proprietors or mom-and-pop shops.

"By the sheer nature of our model, credit unions are able to pivot much quicker to help small businesses," she said, pointing to less "red tape" typically seen among big banks that can prevent quick action of change in order to adjust to the shifting needs of small business customers.

The fact that credit unions are headquartered directly in the markets they serve is one of the most valuable assets of the credit union model. Management teams and boards of directors can convene quickly and make any adjustments to products, services and policies in order to remain agile, said Ellsworth-Etchison. That's compared to larger financial institutions, where board-level decisions are often made in locations other than where small business customers are actually located.

This flexibility is essential to not only supporting small businesses through volatile times, but ensuring they have an optimal experience.

"Our members are still coming to us and looking for top-notch service, even in a COVID environment," said Ellsworth-Etchison.