ATLANTA—Credit unions in several states are expanding into programs to help small business clients increase cash flow and to grow their operations.
The small shops are getting a capital boost by having a portion of their commercial or government receivables purchased by merchant services system “NOWaccount.”
Under the programs, businesses get their cash immediately and NOWaccount takes 2.5% of each invoice. The CU receives a small fee for referring the business.
Kim Humphreys, VP of marketing and business development for NOWaccount, said the arrangement helps CUs deepen relationships, pick up some fee income and give a small business—often a startup—a leg up on growth.
“While many small businesses wait to get paid, they don’t have the capital to take on the next order or a bigger order,” offered Humphreys. “They struggle getting capital. And what happens to the small business when someone is late paying?”
Humphreys contends the partnership helps credit unions fill an important member need.
“Small businesses today hold more than $1.2 trillion in capital in the form of trade credit—outstanding invoices to their commercial and government customers.”
The program is being offered by about 15 CUs in several states through CU Partner Link, a CUSO owned by the credit union leagues of California/Nevada, Georgia, Iowa, Ohio, and Texas/Arkansas/Oklahoma (Cornerstone).
NOWaccount also borrows from some of the participating credit unions, Humphreys explained, using that money as capital to purchase invoices.
The $530-million Telhio Credit Union, Columbus, Ohio, began offering the service about a year ago as part of the Ohio league’s pilot program. The CU now has about 40 small business customers pre-approved for the service.
Matthew Watkins, owner of LogoSurfing Promotional Products in Winder, Ga., was referred to NOWaccount by the $266-million Peach State FCU in Lawrenceville, Ga. He said the arrangement puts "gas in the engine" of his business.
Humphreys added the individual business benefits spill over into the local community, which benefits the credit union and its membership.
--Ray Birch