Alterna Savings and Credit Union Limited (Alterna) has shared its financial expertise for more than 110 years and has a long list of “Firsts” under its belt including being the first full-service, member-owned financial co-operative outside of Quebec, the first credit union to offer micro-loans, the first financial institution to provide services to Canadian cannabis-related businesses and more.
From how they help entrepreneurs and startups to their heavy involvement in community initiatives, Spark Centre sat down with Susan Henry, Director of Microfinance and Economic Inclusion with Alterna Savings to learn more about how they’ve earned a reputation for being “the good in banking”.
Q: What is Alterna Savings?
SUSAN: Alterna Savings and Credit Union Limited (Alterna) has been the good in banking™ for over 110 years. Alterna is made up of Alterna Savings and Credit Union Limited and its wholly-owned subsidiary, Alterna Bank. Together, we have $10 billion in assets under management.
As the first full-service, member-owned co-operative financial institution outside Quebec, Alterna Savings shares its expertise with more than 184,000 members through a network of 34 branches across Ontario, that includes partner Peterborough Community Savings; as well as call centre and digital channels. Members and customers also benefit from an industry-leading online brokerage, investment management services, and have access to over 43,000 surcharge-free ATMs in North America with THE EXCHANGE Network in Canada and the Allpoint Network in the US.
Q: What is perhaps the biggest financial challenge that you see entrepreneurs face?
SUSAN: One of the biggest financial challenges that entrepreneurs face is having enough start-up capital to assist with purchasing equipment or covering operating expenses. As a business owner you may not have all the funds you need so you may be considering a small business loan or looking for an investor. Many new entrepreneurs don’t realize that their personal credit rating can affect their ability to secure capital. Since new businesses typically don’t have an established credit history lenders and investors may look at your personal credit rating to determine if you are a good credit risk.
This is true even for incorporated businesses, because if you don’t have assets that are owned in the business name to secure the loan, the business loans will be based on your personal capacity to borrow.
Your personal credit rating shows how you have handled loans and payments in the past and is an indicator of your potential to make repayments in the future.
Some tips to consider before borrowing are:
- Be realistic and ask yourself: Is credit right for me?
- Can I use credit wisely, given my current financial situation?
- Will using credit create good or bad debt?
- Good Debt is money that you borrow to pay for items that will contribute to the growth and development of your business. Good debt can be used to help increase the cashflow and growth of your business, such as hiring staff, adding a product line or making improvements to your operations.
- Bad Debit is money that you borrow to purchase a depreciating asset that won’t go up in value or generate any income. Any loan or borrowed money that potentially reduces your business’ future net value should be avoided. Examples of bad debt include items like the latest and greatest equipment-unless you are confident that it’s going to generate sales. There are some signs of bad debt you should watch for such as high interest rates, high fees and strict loan repayment terms.
- Do you have a clear plan of how you will use this credit to support your business?
- Does your business plan explain how the loan will be repaid?
- Monitor your credit report annually.
- If you have borrowed money in Canada, including student loans, credit cards and bank loans, you probably have a credit report.
- There are two primary credit bureaus in Canada: Equifax and Trans Union who can provide you with your credit report. You can order a copy of your credit report for free by phone, fax or mailing request.
- Regularly checking your credit report helps to protect you against:
- Identity Theft
- Fraud
- Inaccurate Reporting
Q: How does Alterna Savings help entrepreneurs?
SUSAN: Alterna Savings supports start-ups and entrepreneurs in various ways from providing financial tools and guidance to cash management, card processing and electronic fund-transfers (EFT). The definition of the terms “entrepreneurs and start-up businesses” are quite broad and depends on who you’re speaking with, but under our Microfinance Program it also includes local sole-proprietors, small office/home office (SOHO) businesses, small family businesses and social innovation start-ups.
Alterna’s long history and experience supporting entrepreneurs and start-ups has shown us that there is more to being a successful entrepreneur than access to capital or a reduced-fee bank account. It’s a constantly evolving process that mixes social capital, access to networks, support and resources along the way. That’s why we look at our loans as just the first step in building our relationships with business owners.
Extras Alterna provides to support entrepreneurs
Financial educational content
Digital marketing support
Cash flow management
Access to expanded business networks
Resources to help you be a healthy entrepreneur, such as self-care and stress management
Recently we added a targeted savings component to our Community Microfinance Program, called Microsavings. This built-in savings program is designed for entrepreneurs to build resilience and empower you to create financial reserves for your small businesses while working towards other long-term goals.
Q: To date, Alterna Savings has provided more than 1300 microfinance loans worth over $7 million. What are microfinance loans and how do they benefit startups and entrepreneurs?
SUSAN: We know that lending to many entrepreneurs, particularly those who require loans for start-up purposes, is different from traditional commercial lending. The loan size, eligibility requirements, and borrowers risk profile require our lending programs to be customized to suit the needs of these borrowers.
Traditional requirements for granting credit are often unavailable at the start-up stage. The requirements often include providing evidence of cash flow, established business clientele, reco
rds of previous successful sales and established credit repayment history.
More than 20 years ago Alterna created the Community Microfinance program to address this need in the community. The goal of the program is to reduce socio-economic inequity in communities by creating opportunities to build financial independence and break down barriers to banking for those often excluded from financing such as start-up entrepreneurs. Our close ties to the community and local organizations help us identify individuals most likely to benefit from the program. Through research and outreach, we have developed several microfinance pathways tailored to meet the needs of five key groups.
- Low-Income Individuals/Working Poor ̶ The Income Builder Loan helps those who are looking to bridge their income gap through full time or part-time employment. These are loans of up to $5k.
- Skilled Professionals and Trades ̶ The Skilled Professional and Trades Loans allow self-employed individuals to purchase essential tools and equipment or market their services. These loans are up to $15k.
- Women Entrepreneurs – The Working Women Business Loan supports women looking to gain financial independence or who are looking to self-employment to gain the job flexibility they need to balance multiple demands. These loans are up to $25k.
- Social Entrepreneurs – The Social Impact Entrepreneurship Loan supports for-profit and non-profit initiatives using business strategies to build a better world. These loans are up to $25k.
A micro-loan can be a game changer in helping low-income individuals become economically and socially engaged in the financial system. These loans help entrepreneurs increase their income, which brings household stability by providing access to food, clothing, shelter, education and enables them to build assets for future security. The overall impact can lead to the reduction of poverty, improved quality of life and personal growth, and contribute to the local economic growth and health of the communities where these businesses operate.
“Alterna’s long history and experience supporting entrepreneurs and start-ups has shown us that there is more to being a successful entrepreneur than access to capital or a reduced-fee bank account.“
Q: What is one success story that has come out of this initiative?
SUSAN: One of our entrepreneurs, a new Canadian and a single mother who, despite holding two jobs, struggled at times to pay for groceries. With a spotty credit history, few assets and four children to support between the ages of seven and 19 her life was a struggle.
Recently, she told us, “It was very difficult to make ends meet; sometimes even providing the basics was hard.” She received a micro-loan from Alterna and today her business is flourishing. She has been able to provide for her family and has created employment for more than 100 others. She said it would not have been possible to get this type of support from other financial institutions.
She said the micro-loan changed her life. It’s easier to take care of her children and she’s happy to give other people, especially newcomers, an opportunity to work. This is the difference a small loan can make.
Q: Alterna is heavily involved in community initiatives including grant programs, supporting newcomers to Canada, financial literacy, investing in education, youth empowerment and more. Why is providing these community initiatives so important to Alterna?
SUSAN: Our credit union was created so that our employees and members thrive and so that our communities can flourish together. We’re on the ground in communities across the province working together to make life better and we follow seven guiding principles: live well, prosper, innovate, learn, care, play and connect.
Q: What is one piece of advice that you have for startups or entrepreneurs?
SUSAN: You control your own destiny! We know that many start-ups are operating on a shoestring small business budget and it can take months, if not years, to see any profits retained in the business. Similar to your own personal finances, it is important to establish a budget and set up a backup savings plan.
It was clear during the COVID-19 pandemic that many micro and small businesses were not prepared financially because they didn’t have the financial resources needed during this unpredictable economic downturn. As a result, many owners were vulnerable to losing their business and livelihood. This is the reason Alterna Savings implemented a targeted savings component to our Community Microfinance Program, called Microsavings. This built-in savings program is designed for entrepreneurs to build resilience and empower them to create financial reserves for their small businesses while working towards other long-term goals.
For more information on Alterna Savings visit https://www.alterna.ca/
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