Starting a small business is not for the faint of heart. In fact, a recent Industry Canada study found that nearly one-third of all small businesses don’t survive longer than two years.
Only half make it to the five-year mark. The truth of the matter is that the brave entrepreneurs who step into the marketplace need all the help they can get.
Credit unions can offer a leg up. That was the takeaway in May 2013, when the Canadian Federation of Independent Business (CFIB) issued a report showing that credit unions outperformed banks in meeting the financial needs of small and medium-sized enterprises (SMEs). The 2013 results were based on survey responses from almost 13,000 SME owners.
Overall, credit unions achieved the highest rating, 7.4 out of 10. They ranked first in three categories: financing (6), fees (7.5) and account manager (7.2). On service, credit unions scored 8.8. The results were consistent with findings in 2010 and will likely be consistent when the next report is issued.
One reason for credit unions’ good report card? “The turnover of account managers is much lower at the credit unions compared to the banks,” says Doug Bruce, CFIB vice president of research. “Credit unions are more stable in terms of having the same person dealing with the same clients. It’s not someone in the regional head office [of a bank] making a decision about someone they’ve never met. Face-to-face banking is much better for the client.”
“Credit unions are more stable in terms of having the same person dealing with the same clients … Face-to-face banking is much better for the client ”
—Doug Bruce,Canadian Federation of Independent Business
Another consideration: Big banks tend to levy significant fees on everything from overdrafts to monthly maintenance of accounts. Credit unions have fewer and more cost-conscious fees by comparison. Then there’s the service factor. Credit union account managers see themselves as partners with the businesses they back and often go all out to promote and encourage their success.
Real people, of course, are behind all those glowing statistics. Here’s how five intrepid entrepreneurs across Canada experienced the credit union difference.
B&B Energy Services Ltd., Slavely, Alberta: This custom welding and fabricating company does structural and piping fabrication for the province’s oil patch. The business was established in 2011 by two experienced welders, Brent Schuler and Brad Keeley, along with their wives, DeCoda Schuler and Kim Keeley. The company now has 14 employees. “We’ve doubled our revenues each year,” says DeCoda Schuler, the secretary-treasurer. “Despite the downturn in the oil and gas sector, we’re as busy as ever. We’ve used it as an opportunity to diversify.” B&B is doing the structural expansion of the Lafarge cement plant at Exshaw, 80 kilometres west of Calgary, and is also serving agricultural clients.
“Despite the downturn in the oil and gas sector, we’re as busy as ever. We’ve used it as an opportunity to diversify”
—DeCoda Schuler, B&B Energy Services Ltd.
When it incorporated, B&B became a member of Chinook Financial, where the owners already had personal accounts. Chinook Financial is now a part of Connect First Credit Union (100,000 members, $4 billion in assets). The company has a chequing account based on use — a way to keep the firm’s service charges down, says Susie Hunt, who became B&B’s account manager in mid-2013. Connect First also provides an authorized overdraft, similar to a line of credit, except the borrower doesn’t have to pay interest on the amount it doesn’t use. “[That’s] especially important for a business that supports the oil industry since there’s usually a lag time of 60 to 90 days for payment of receivables,” says Hunt.
B&B also needs to make capital purchases from time to time. Knowing it has pre-approved financing up to an authorized limit means the firm can make a quick and advantageous deal to buy welding trucks or other equipment.
Hunt makes on-site visits to B&B with paperwork that needs to be addressed. “They’re pretty busy and it can be tough for them to get away,” she says. “It gives me the opportunity to see what they’re doing and to understand their operations better. You get a feel for their drive and commitment.”
Supporting a media juggernaut
urbanicity, Hamilton, Ontario: Martinus Geleynse owns urbanicity, a local media empire that includes a full-service creative agency called urbanicity Omnimedia, as well as urbanicity magazine, a monthly tabloid about Hamilton people and issues. The magazine launched in May 2011 with $30,000 in pre-sold ads. The free publication, which has two full-time and three part-time employees, does a print run of 10,000 copies. Geleynse’s ad agency books space for advertisers in the magazine at a discount.
“Our rule was never to go to print unless we could do that profitably from Day One,” says Geleynse. “We had no idea what we were doing when we started. [But] as we’ve gone on, we’ve gotten more business savvy. We like to call ourselves a vertically integrated communications company.” Geleynse also owns web properties, an indoor billboard network and operates bus tours to other rust belt cities such as Pittsburgh and Detroit. He runs food festivals too.
Geleynse left the Royal Bank of Canada for FirstOntario Credit Union (101,000 members, $2.6 billion in assets) when he launched the publication. His company maintains chequing and savings accounts and a line of credit with the financial services co-op. Andrew Mantecon, who has been at FirstOntario for six years and has a portfolio of over 100 businesses, became urbancity’s account manager a year ago.
“We present ourselves as not just their financial institution, but as their business partner,” he says. Case in point: FirstOntario sponsors an annual competition called the 1Awards, which highlights Hamilton’s top SME owners and awards cash and in-kind services to four winners. “Martinus was one of our first winners,” says Mantecon. “We’ve used him in a lot of our ads for the program. It’s created a lot of awareness for him. It’s been like a free ad campaign.”
As for FirstOntario’s service, Geleynse says, “They know me by name. They immediately take care of whatever we need. They care about our business more than anyone else has. Also, they’re based here in Hamilton. They’re proud supporters of the local community and that means a lot to us, because we’re hyper-local.”
“They know me by name. They immediately take care of whatever we need. They care about our business more than anyone else has”
—Martinus Geleynse, urbanicity
Adventures in personalized service
LocoLanding Adventure Park, Penticton, B.C.: LocoLanding, one of the top five theme parks in Western Canada based on attendance, generates 90 per cent of its yearly sales during 60 summer days. The facility in the Okanagan Valley was first built by Diana Stirling’s parents in 2001 as an 18-hole mini golf course. Stirling and her husband Dustin bought the 2.5-acre property in 2011 and turned it into a full-fledged theme park. From May to September, LocoLanding springs to life, with 57 teenage seasonal workers operating 10 attractions, including go-karts, bumper boats, a rock climbing wall and Jump Off, a free fall from a two-storey height onto a huge cushion. “We always try to be the first to bring in new attractions,” says Stirling.
In May 2014, Stirling moved her business account to Valley First Credit Union, a division of First West Credit Union (168,000 members, $6 billion in assets). Heather O’Coin, her business banking advisor, has worked for Valley First for 12 years and had actively pursued Stirling’s business. “The biggest impact [of joining Valley First] is the savings,” says Stirling. She says she writes lots of company cheques, adding that First West’s $20-per-month unlimited chequing account for business saves LocoLanding hundreds of dollars a month.
In addition, Stirling liked the way the credit union highlights its members to Valley First followers on social media and is impressed with the credit union’s personalized service. And like Hunt does for B&B, O’Coin goes to Stirling when necessary. During busy 14-hour days, when Stirling didn’t have time to go to Valley First to sign documents, O’Coin brought them to her at LocoLanding. “They get our business,” says Stirling. “Their whole system is set up in such a way that we get what we need when we need it.”
Partners in expansion
Johnson Waste Management Ltd., Winnipeg, Manitoba: This family business involves collecting and disposing of solid, non-hazardous waste for a range of clients. Its market includes Winnipeg and surrounding municipalities, along with Selkirk, Manitoba and Kenora, Ontario. Eric Johnson, a former top executive with the waste management firm BFI Canada Inc., started his own company with his sons, Jeff and Grant, in 1999. The waste-disposal market hasn’t changed much since then, but the company has achieved steady growth. “We have a strong footprint here in the Winnipeg marketplace, serving mainly the commercial [sector],” says Jeff Johnson, who adds that the 45-employee firm is one of the top three waste disposal and recycling companies in size.
Eric Johnson says that in 2002, he concluded that his company and Toronto Dominion Bank weren’t a great fit so he closed his account there and moved to Cambrian Credit Union (61,000 members, $3.1 billion in assets). The Johnsons wanted to expand, says Cambrian senior account manager Dave Lester, but the bank wasn’t comfortable increasing their loans. “It didn’t want to finance containers, only accounts receivable and trucks.”
Lester, impressed with the Johnsons’ detailed in-house financial statements and cash flow forecasts, put together a financing package for the firm — and he’s handled the account ever since. The continuity has been invaluable. “You don’t have new people coming in to learn your account,” says Jeff. “Dave knows us and we know Dave.” Johnson Waste Management takes advantage of several Cambrian products, including a line of credit and cash management services. As well, the firm has used term financing for various equipment purchases. “Some years, they borrow several million dollars for equipment, but the equipment always gets paid down,” says Lester.
The bottom line, says Jeff: “We do the work, we do the selling, but behind all that you need to have the peace of mind of solid financial backing. With Cambrian, it’s been very smooth.”
A high-value client
Time + Space Media, Halifax, Nova Scotia: In 1988, Donna Alteen spotted a market opportunity for independent media counsel in Nova Scotia. “There were ad agencies, but no media boutiques, no consulting firms helping clients identify their audiences and develop strategies,” she recalls. So, at the age of 27, she launched Time + Space Media. Her firm now has 26 employees, having grown by 15 per cent in the past five years. It generates revenues in the $3 million range, with annual growth of about five per cent. The majority of revenue is fee-based, derived from doing research and planning strategy for clients. On the media-buying side, traditional media still generates the majority of sales, but digital now accounts for 35 per cent of revenues.
“The credit union has been a collaborative partner. As we’ve grown, they’ve found ways to accommodate us”
—Donna Alteen, Time + Space Media
Alteen’s agency originally banked with the Bank of Montreal, but it switched to Credit Union Atlantic (18,000 members, $370 million in assets). “We maintain high cash balances and we felt we didn’t need to be paying such high fees,” says Alteen. The firm has a $1 million line of credit and has financed the purchase of several buildings with CUA mortgages.
“They’re good members,” says account manager Paul Ryan. “They’ve been with us for almost 12 years. They use a full range of products. They use our online platform extensively and even do some wire transfers in the branch. They’re definitely in the top quartile. We would describe them as high value.”
Ryan inherited the account — one of 120 businesses in his portfolio — when he joined the credit union in December 2014. Having worked with tech startups for the previous five years, he has a familiarity with the digital industry. “I’m quite active in social media. That resonated with Donna when we met. She wasn’t used to that with a banker. I think there’s some value-added in that I’ve lived and breathed in the sector they’re in,” he says.
Alteen agrees. “The credit union has been a collaborative partner,” she says. “As we’ve grown, they’ve found ways to accommodate us.” ◊