Credit unions are influential bodies when it comes to small business lending. Indeed, next to the Royal Bank, credit unions are the second largest lender to SMEs. Larger banks like RBC prioritize businesses with only low risk, such as those looking to be expanded or purchased as they generally have at least five years of financial statements.
However, for most start-ups, food and retail businesses – often times banks are not an option – and indeed they must turn to a credit union who prioritize “character” in lending. With rising costs, many smaller credit unions are merging with larger ones and this leads to further centralization of decisions – and virtually no consideration of character in lending. As all Copperfin members are given a vote on the merger, and given its importance to provide credit facility to small businesses- this merger is a decision that should be closely examined by all members before proceeding.
There are five Cs of lending: character, capacity, capital, collateral and conditions. A review of recent Copperfin advertising highlights how, in their lending decisions, they emphasize the “character” C in lending – from salons to eateries. Most big banks and credit unions ignore the first “c” as lending decisions are made centrally. Indeed, many local businesses in Thunder Bay use Copperfin – and their use of the credit union can indeed, in part, be attributed to the bustling downtown businesses we have – which are a stark contrast to the “big box culture” of Sault and Sudbury regions. It also has a role in personal lending. Recent marketing highlights how using foster care income allowed one family to purchase property, how small downtown businesses accessed credit when banks said no, and how flexible financing is valued by the Thunder Bay small business community. It even allowed one couple to buy a sailboat with a lower rate, naming it "Copperfin."
Northern Credit Union is, essentially, a big bank. Most lending decisions are made centrally in Sault Ste. Marie, and not in the locality where the proponent lives. As a result, the very premise of a credit union – to provide facility to those with less access – becomes negated. Small businesses will have a more difficult time to access credit – and larger national brands will supersede. Hence, the big business culture in northeastern Ontario.
One anomaly in northeastern Ontario – is Elliot Lake and Blind River – who have a seemingly bustling small business scene. While Northern Credit Union services the communities – if one looks further, there is another entity that does most of the commercial lending. ELNOS – a community entity started in 1990s – is essentially a small business lender with a focus on economic development in the region. It provides small and medium sized businesses access to credit facility as an alternative to the big banks and services the two communities along Lake Huron’s North Shore – from manufacturing companies through to downtown retail fronts. Indeed, having a local lending entity to small businesses is important for the vibrancy of the small business community.
Should the merger proceed, Iocal administration and lending decisions that Copperfin currently offers will also be lost from Northwestern Ontario’s hands. One does not need to look further than the many other mergers of Northern Credit Union recently, to see their demonstrated “success” in achieving efficiency above all else. This is a significant drawback for members who value personalized service and local decision-making.
Proponents argue that increased efficiency from the merger will result in a lower costs, and that enhanced branch networks would increase service. However, all credit unions can use ATMs at other credit unions for no cost already, and lower costs are always through consolidation – much of which has already happened (i.e. closing of Ear Falls and Nestor Falls branches).
Should this merger proceed, Copperfin's client-focused corporate culture and emphasis of character in lending will be lost in the merger. Northwestern Ontario will lose its largest credit union. Copperfin has a reputation for being highly personalized and responsive to the needs of its clients. The benefits of marginal efficiency that the merger may bring are quickly outweighed by the loss of these valuable assets.
For the merger to proceed, members will have to vote. I urge you to vote “NO” on this initiative.
Andrew Ault is Financial Controller for Maamwesying Health Services, PhD Candidate in Finance at Carleton University, and is Lecturer of Business Administration at Lakehead University. He holds master degrees in business, economics and finance research from Lakehead University. Ault is also a member of Copperfin Credit Union.
