The main difference between banks and credit unions is who owns them. Credit unions are not for profit organizations that are owned by the customers, called members, who receive the profit earned by the bank in the form of lower fees and rates. On the other hand, banks are owned by individuals or groups of stockholders who profit from the money made by the bank. Due to the larger size of many banks, the fees and rates charged are often very similar to credit unions, so you will need to compare on an case-by-case basis.

Both banks and credit unions are required by the government to keep your money safe, even if the institution goes under. Banks are insured by the FDIC, and credit unions are insured by NCUSIF, so you can feel safe with loans at either institution.

Products offered by banks and credit unions are basically the same. Your small business can obtain loans, get a checking or savings account, or any other service that you will be likely to need. On the other hand, banks are often able to provide a larger range of services simply due to their larger size and greater resources.

Customer service at both banks and credit unions can range from great to not so good. In general, credit unions and smaller community banks work harder to earn customers, and so they often provide better and more personal service than larger banks. If you prefer a more hands on banker, a smaller bank or credit union will serve your needs better.

For businesses seeking financing to open or expand their operations, the big question is which type of institution will provide more favorable loan terms. Large banks often send loan decisions through a board that can be located hundreds of miles away, and the decision is often based solely on the strength of the application. On the other hand, credit unions usually make decisions locally, and are often more willing to consider a member's entire situation before making a decision. Banks can often give better terms and larger loan amounts, but if you need a loan quickly, a credit union may be able to provide a faster decision.

When it comes time to choose between banks and credit unions for a small business loan, there is no clear answer, but you should consider what each one has to offer before making a choice. For many business owners, keeping accounts in both types of institutions can be beneficial because it enables them to take advantage of the strengths of each type of financial institution. Talk to several different banks and credit unions before making a decision and find out which one is the best match for your company.