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The process of forming a credit union

If you're planning to open a new credit union, you can use the NCUA's guide for help.

If you've been thinking about opening a new credit union, the National Credit Union Administration has released a new resource to help you. The NCUA charters federal credit unions, meaning it provides the license for a new union to legally operate. By looking at the resources available through NCUA, including whitepapers, worksheets and helpful data, you can create a thorough and realistic action plan prior to applying for preliminary charter approval.

The NCUA guide is comprehensive and breaks down the process into steps that make it easier to handle.

"Starting a credit union is a tremendous undertaking, and people who take on this challenge need to understand what's involved in this process," said Debbie Matz, NCUA board chairman. "This new guide is essentially a roadmap to success, explaining in detail how to complete the process."

The NCUA Office of Small Credit Union Initiatives asks the potential business owners to consider a few factors before diving in to the process, such as:

  • Does the area in which you're looking to open a credit union need another financial institution?
  • Do you have a management team ready to run the organization?
  • Can you secure the necessary funding to cover pre- and post-chartering costs?

Once you've determined a credit union is needed and can be successfully started and run, you can follow the NCUA's plan.

The first step the association encourages is to research the charter process, then plan for the specific location and membership pool of the union. You need to know where you'll be opening your first location and who you'll seek to draw in as customers. Your future customers will also dictate whether you need to seek a low-income designation for your business.

The second step is for the start-up to secure funding. A successful credit union needs healthy capital to cover the initial costs of getting a charter, opening a location and employing workers, not to mention selling financial products. The NCUA provides information on estimating start-up costs.

Next, if you haven't already, you need to secure credit union officials and management. Once the decision makers are in place, a more definite business plan can be drawn up and proper recordkeeping can be established. You can find information regarding federal credit union bylaws on the association's website.

Once the preliminary decisions have been made, NCUA will help you apply for a charger through providing checklists, worksheets and sample forms.