Credit unions are non-profit corporations that are established to assist their members. They offer different kinds of financial services, including accepting deposits and making loans.
A credit union is a financial cooperative owned by its customers or members, democratically managed by them, and run with the aim of maximizing the economic advantage of its customers by offering financial services at reasonable and competitive prices.
Based on statistics in terms of revenue, the Canadian credit union market will be worth $23.3 billion in 2023. Note that the largest credit union in Canada is Vancity, which has 55 branches throughout British Columbia, and it also has more than $30 billion in total assets.
Steps on How to Start a Credit Union in Canada
Table of Contents
Conduct Market Research
Market research is essential to the business’s success. It offers information about your industry and competitive environment. This informs you how the target clients and customers you wish to reach out to view your company.
Through research, you will discover who your consumers are, where they are, and who is likely buy from you. It will also enable you to understand the mind of your target market and adjust to their needs, in order to win their loyalty, and also win over brand advocates.
a. Who is the Target Market for Credit Union in Canada?
- Corporate executives
- Salary earners
b. Is Credit Union a Profitable Business in Canada?
Yes, a credit union is a profitable business in Canada. According to the recent information provided by the NCUA, membership in federally insured credit unions increased by 4.9 million over the year and reached 128.6 million in the third quarter of 2021.
c. Are There Existing Niches in the Industry?
Yes, there are niches in the credit union industry, and they are;
- Federally insured credit unions
- Privately owned credit unions
d. Who are the Major Competitors?
- Canadian Credit Union Association
- iNova Credit Union Limited
- Credit Union Central of Ontario
- Offshore Credit Union
- Moya Financial Credit Union
- ABCU Credit Union Ltd.
- Conexus Credit Union
- Affinity Credit Union
- Conexus Credit Union
- Christian Credit Union
- Affinity Credit Union
- Saskatoon City Employees Credit Union
- Servus Credit Union – Plamondon
- Central 1 Credit Union
- Innovation Credit Union
- Coast Capital Savings Federal Credit Union
- UNI Financial Cooperation
e. Are There County or Province Regulations or Zoning Laws for Credit Union in Canada?
Yes! Credit unions are either subject to provincial or federal regulation in Canada. Individual credit unions are subject to regulatory control, and credit unions are obliged to cooperate with government organizations in order to be ranked among the nation’s most stable financial institutions.
It is imperative to know that the legislation in Canada that controls banks and federal credit unions is the Bank Act. The Bank Act’s provisions that have been classified as consumer provisions are managed by the Financial Consumer Agency of Canada (FCAC). Note that this guideline is adherence to public pledges and conduct.
f. Is There a Franchise for Credit Unions?
No, there are no franchise opportunities for a credit union in Canada.
g. What Do You Need to Start a Credit Union in Canada?
- A feasibility report
- Credit union charter
- Licenses and permits
- Office space
- A corporate bank account
- Software apps
- Startup capital
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a Credit Union business are;
Creative Credit Union Business Name ideas
- Allison Group© Credit Union, Ltd.
- McNamara Association® Credit Union, Ltd.
- Saskatchewan Farmers© Credit Union, Ltd.
- Windsor Mechanics® Credit Union, Ltd.
- North Battleford™ Credit Union, Ltd.
- Wesley Chapel™ Credit Union, Ltd.
- Doral Lauderhill© Credit Union, Ltd
- Plamondon Community® Credit Union, Ltd.
- Toronto Tradesmen© Credit Union, Ltd.
- Borden Community© Credit Union, Ltd.
- Saskatoon Community® Credit Union, Ltd.
- Union Group® Credit Union, Ltd.
- Vancouver Union® Credit Union, Ltd.
- Sanford Wellington® Credit Union, Ltd.
- Edmonton Truckers® Credit Union, Ltd.
- Rowland Hyden© Credit Union, Ltd.
- Welland Welders™ Bookkeeping Services, LLC
- Entrée Group® Credit Union, Ltd.
- West Prestigious® Credit Union, Ltd.
- Next Group™ Credit Union, Ltd.
Register Your Business
a. What Type of Business Structure is Best for Credit Unions in Canada?
There are different options for business structures as it relates to credit unions, but the corporation is the one that most people in the industry considered better. This is because a corporation has limited liability—the owners are not liable for the debts or liabilities of the business—it is frequently considered.
Note that obtaining funding from investors or financial organizations is simple. It is necessary to be incorporated in order to transact business with governments or other companies, and business income can be distributed in the form of dividends or salaries, allowing you to minimize your tax liability.
b. Steps to Form a Corporation in Canada
- Whether it is a federal or provincial/territorial incorporation, you should register your business.
- Contact the Canada Revenue Agency (CRA) to open a corporate income tax account, and also obtain a federal business number.
- In all Canadian jurisdictions where you want to conduct business, ensure to register as an extra-provincial or extra-territorial corporation.
c. What Type of License is Needed to Open a Credit Union in Canada?
- Credit Union License
- Zonal Permits (Applicable in some cities)
- Signage Permit
d. What Type of Certification iOns Needed to Open a Credit Union in Canada?
- Obtain a Certificate In Commercial Credit (CICC).
e. What Documents are Needed to Open a Credit Union in Canada?
These are legal documents that are required if you want to run a credit union in Canada;
- Council Permit
- Certificate in Commercial Credit (CICC)
- Business and Liability Insurance
- State Permit and Building Approval
- Certificate of Incorporation
- Credit Union License
- Contract Document.
f. Do You Need a Trademark, Copyright, or Patent?
There may not be a need to file for trademark protection or intellectual property protection. The nature of the business makes it possible for you to run the company, without needing to take legal action against anyone who uses your intellectual property illegally.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Credit Union in Canada?
The startup cost for a credit union could be anywhere from $5,000 to $150,000 or more.
b. What are the Costs Involved in Starting a Credit Union in Canada?
- Business registration fees – $750
- Legal expenses for obtaining licenses and permits – $7,300
- Insurance – $5,400
- Rent/Lease – $70,000
- Other start-up expenses include stationery $500, and phone and utility deposits ($2,800)
- Operational cost (salaries of employees, payments of bills et al) – $40,000
- start-up inventory – $5,000
- Office equipment (cash register, security, ventilation, signage) – $4,750
- Furnishing and equipping – $50,000
- Website- $600
c. What Factors Determine the Costs of Opening a Credit Union in Canada?
- The size of the credit union (the number of members you want to admit)
- The choice of location
- The required licenses and permits
- The type of facility
- The additional services offerings
- The cost of hiring and paying a business consultant and attorney
- The cost of marketing a credit union
- The cost of furnishing and equipping the credit union facility
- The cost of the insurance policy covers
- The cost of registering the credit union
- The cost of recruiting and training the employees
- The cost of the purchase and customizing of uniforms, shoes, and caps for the employees
- The cost of the grand opening of the credit union.
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
Your credit union can be operated from a leased or rented office space or a home, so you don’t need to build a facility for it. You can work from home and only rent an office for corporate fronting.
e. What are the Ongoing Expenses of a Credit Union?
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Chief Executive Officer – $45,000
- Human Resources and Admin Manager – $36,000
- Bookkeeper and Payroll Administrator – $36,000
- Accountant – $32,000
- Marketing Officer – $32,000
- Client Service Executive -$28,000 Per year.
g. How Do You Get Funding to Start a Credit Union in Canada?
- Raising money from personal savings
- Raising money from investors and partners
- Sell shares to interested investors
- Applying for a loan from your bank
- Pitching your business idea and applying for grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
Toronto Tradesmen© Credit Union, Ltd. is a licensed credit union. The company will have its headquarters in Toronto, Ontario. We have obtained conventional office space in a prime location in one of the city’s commercial districts.
The customers’ best interests always come first, and our values and code of conduct serve as the foundation for everything we do. We will make sure to work with experts who have more experience with different bookkeeping services.
- Accept deposits
- Make loans and also grant other financial services
c. Mission Statement
Our mission is to assist and encourage our customers to save and receive loans, that will enable them to start their businesses, or expand them.
We want to build a credit union that is owned by its customers or members, democratically managed by those members, and run with the aim of maximizing the economic advantage of its customers or members, by offering financial services at reasonable and competitive prices.
Our vision is to build a credit union – a brand that will be the number-one choice for tradesmen and other clients in Toronto, Ontario.
d. Goals and Objectives
The goals and objectives of the credit union as a member-owned and cooperative institution are to provide a safe place for members to save and borrow money at reasonable rates.
e. Organizational Structure
- Chief Executive Officer (Chief Investigator)
- Human Resources and Admin Manager
- Bookkeeping Administrator
- Marketing Officer
- Client Service Executive.
a. SWOT Analysis
- Effective structure in place
- Experienced and qualified employees and management
- Reliable software app
- Support from relevant organizations
- Water-tight strategies on how to expand beyond the major markets.
- Financial constraints
- A new organization that will be competing with well-established credit unions and banks
- Inability to retain experienced and qualified employees longer than desired.
- Partnerships and mergers between established credit unions and the federal government.
- Good support structure for credit unions in Canada.
- The arrival of a new credit union within our market space
- Unfavorable government policy and regulations
- Differences in management and culture are the biggest barriers to integrating credit union startups into traditional financial institutions
- Liability problems
- Continuously changing consumer demands, as it relates to how they expect credit unions to serve them.
b. How Do Credit Unions Make Money?
Credit unions make money from interest on loans given out.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards/Point of Sale Machines (POS )
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft.
d. Sales and Advertising Strategies
- Introduce your credit union and the services you offer, by sending introductory letters alongside your brochure to corporate organizations, small business owners, and other key stakeholders in the city where your business is located.
- Advertise on the internet blogs and forums, and also on social media like Twitter, Facebook, and LinkedIn to get your message across.
- Create a website for your business, so as to give your business an online presence
- Advertise your business in community-based newspapers and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
A credit union gives out a loan based on the interest rates as agreed by the members.
b. How Much Profit Do Credit Union Owners Make a Year in Canada?
A credit union is a non-profit organization, and the owners are not expected to make personal profits.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the credit union (number of members they have)
- The financial capacity of members of the credit union
- The management style of the credit union
- The business approach of the credit union
- The advertising and marketing strategies adopted by the credit union facility – business
- The number of years the credit union facility is in business
d. What is the Profit Margin of a Credit union Product/Service?
A credit union is a non-profit organization and the owners are not expected to make personal profits.
e. What is the Sales Forecast?
- First Fiscal Year: $350,000
- Second Fiscal Year: $480,000
- Third Fiscal Year: $600,000
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for Credit Union in Canada?
- The demography of the location
- The demand for the services of the credit union in the location
- The purchasing power of businesses and the resident in the location
- Accessibility of the location
- The number of credit unions in the location
- The local laws and regulations in the community/state
- Traffic, parking, and security et al.
b. What City is Best to Open a Credit Union in Canada?
- Toronto, Ontario
- Montreal, Quebec
- Calgary, Alberta
- Ottawa, Ontario
- Edmonton, Alberta
- Winnipeg, Manitoba
- Mississauga, Ontario
- Vancouver, British Columbia
- Regina, Saskatchewan
- Saskatoon, Saskatchewan.
c. What Equipment is Needed to Operate a Credit Union?
You would need an internet facility- computers/laptops, a telephone, a fax machine, and office furniture (chairs, tables, and shelves).
When hiring employees for a credit union, you should hire a competent chief executive officer (Chief Investigator), human resources and admin manager, account manager, marketing officer, bookkeeping administrator, and client service executive.
Launch the Business Proper
No credit union opens for business without first organizing an opening celebration to formally launch the business. A low-key party, rather than a big opening party for everyone in the neighborhood where your credit union will be located can be the better option.
With proper launching, you will officially inform the residents of your location that your credit union is open for service.
a. What Makes a Credit Union Successful?
- Customer-centric business approach
- Good marketing approach
- Strong vision
- Passionate leadership
- Innovative ideas.
b. What Happens During a Typical Day at a Credit Union?
- The office is open for the day’s work
- The To-do list is reviewed
- Employees go straight to their job description (receiving savings and processing loans)
- Marketers go out to market the service offerings of the company
- Reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Credit Union?
- Excellent accounting and bookkeeping skills
- Excellent savings and loan administration skills
- Excellent marketing skills
- Excellent computer skills
- Ability to pay attention to details
- Good managerial and human development skills
- Visionary leadership
- Team-building and interpersonal skills
- Excellent communication and negotiation skills
- Organizational skills
- Problem-solving ability
- Good supervisory skills
- Experience in managing credit unions or similar non-profit organizations
- Experience in business administration
- Experience in handling accounting and bookkeeping software and other relevant software.