By NewtekOne
A business member can own a strong company, generate consistent cash flow and have substantial equity in the business or its real estate, yet still be constrained by the structure of the company’s debt.
For more than two decades, Newtek has been a CUNA Strategic Services alliance provider. Newtek gives credit unions an additional lending solution for established business members who need longer amortization periods, lower monthly payments and greater control over their capital.
The opportunity goes beyond helping the member obtain a better loan. It can also help the credit union win the member’s operating accounts, deposits and broader banking business.
The problem is not always the business. It is often the loan structure.
The Structure Matters
Short amortization periods create high monthly payments. Some commercial loans do not meaningfully amortize principal, leaving the business owner with a substantial balance and another refinancing requirement at maturity.
Traditional commercial loans can also include covenants that restrict distributions to owners. Cash generated by a successful business can remain trapped inside the company solely to satisfy the lender.
Newtek provides long-term, fully amortizing business loans with amortization periods of up to 25 years. Principal is paid down with every scheduled payment, eliminating balloon payments and the need to refinance a large remaining balance at maturity.
Longer amortization can materially reduce monthly payments and improve cash flow. More capital remains available to purchase equipment, build inventory, add employees, renovate a location, fund marketing or maintain liquidity.
Total Flexibility Over Available Cash
Newtek does not impose traditional loan covenants that restrict how a business distributes its available cash.
Business owners have the flexibility to distribute up to 100% of available cash rather than retaining funds solely because of a lender covenant. The owner decides whether that cash should remain in the company, be reinvested in the business or be distributed to ownership.
The loan supports the business. It does not dictate how the owner uses the company’s capital.
A Loan Referral That Can Generate Deposits
This is not simply an opportunity to refer a loan that the credit union does not want to retain. It is an opportunity to provide a better loan structure while bringing the member’s banking relationship to the credit union.
The business member receives long-term financing through Newtek. The credit union can provide the business checking accounts, treasury services and other banking products the member needs to operate the company. Business proceeds, operating balances and ongoing deposits can move to the credit union rather than to another commercial lender.
The result is a better loan for the business member and a larger, more valuable relationship for the credit union.
Newtek provides the lending solution. The credit union gains the deposits and banking business.
Recognizing the Opportunity
These opportunities often surface during ordinary conversations with business members.
A member may mention that monthly payments are limiting cash flow, a balloon payment is approaching or the current loan is not meaningfully reducing principal. The lender may be restricting owner distributions, additional borrowing or other ordinary business decisions. The owner may also have substantial equity in the business or commercial property but limited access to working capital.
These are not necessarily signs of a weak business. They are signs that the current financing structure may no longer fit the company.
A better structure can provide longer amortization, materially lower monthly payments, fully amortizing principal, no balloon payments, additional working capital and no traditional loan covenants restricting cash distributions.
For the credit union, the referral can also open the door to the member’s complete banking relationship. Help your business member obtain a better loan structure while bringing its banking and deposits to your credit union. Refer the opportunity to Newtek for a complimentary loan review.
Connect with NewtekOne to learn more.
Loans are made by Newtek Bank, N.A., Member FDIC, the banking subsidiary of NewtekOne, Inc. [NASDAQ: NEWT]. All loans are subject to credit approval, underwriting requirements and applicable terms and conditions.
