NoteWorthy Credit Union makes loans that banks won’t make. This is civil society at work, supporting culture in a way that the for-profit sector cannot.
Henry Peyrebrune has been a bassist in The Cleveland Orchestra for 24 years, where he also volunteers as a gift officer. He first stepped into his development role after exchanging grantwriting for his daughter’s music lessons.
For the past 12 years, he has also been board chair of NoteWorthy Federal Credit Union, a small credit union that provides musical instrument loans to professional and pre-professional musicians around the country.
I was delighted to have the chance to interview Henry to find out more about the unique financial needs of musicians and the way credit unions can fill them.
First things first: how do you make the leap from musician to credit union board member?
I’ve been involved in lots of different orchestra communities on the union and management side. I’m actually working as a fundraiser for the orchestra now. So I guess I have a reputation as a joiner. When a friend invited me to join the credit union board, I turned him down, but he kept asking until I agreed.
How did Noteworthy get its start?
Noteworthy was founded in the 1960s as the local musicians’ credit union, although it’s completely a separate legal entity from the musicians union. In the mid-90s, the membership was expanded to include not just local union members but management too. Eventually it was opened up to other musical organizations throughout Northeast Ohio. Now we provide loans for people to buy musical instruments all around the country.
What differentiates Noteworthy from a traditional bank for your customers?
People sometimes don’t make the distinction between credit unions and banks, so I think it’s important to explain that we really do function as a nonprofit. We are a 501(c)(1), so we are tax-exempt, but unlike a 501(c)(3), we don’t accept donations.
We’re mission-driven, and we are owned by the community, that’s how we make things work. Credit unions are democratically governed financial cooperatives that are owned by their members, and that membership is limited to a specific group of people with a common interest. In our case, it’s members of about 40 different organizations, most of which are locally based—though we’re making the transition into more national groups. Our members are committed to Noteworthy because they like the personal service, and they like that they’re respected. We have a very small staff—just two people. When you call, you know who you’re talking to, and they know who you are.
It’s a completely different relationship when you’re one of the owners of the bank like you are in a credit union. You can be as involved as you want. Every year we have an annual meeting, and our members elect the board. So you can really have a say in your own credit union.
What about for the musicians, why would they choose Noteworthy over a traditional bank?
Well, banks are hesitant to loan to musicians. Actually, they’re more than hesitant—traditional banks simply will not make instrument loans. An instrument loan is perceived as risky because the life of a musician falls outside what they’re used to evaluating and so they’ll only make a high-interest personal loan [if a musician needs an instrument].
But we understand their careers and their income streams. We know what looks like a successful career as a musician and might not work out and we can tell the difference and be responsive to what will help people seek personal success. If you have a question or problem, we’ll help you. If you accidentally overdraw your checking account at Noteworthy, you’re more likely to get a phone call than a fee.
Does that put you in a position of leadership on a personal level? Do people come to you for advice on whether or not they can make it financially as a musician?
It will occasionally come to that. We were talking to a young man, a recent college grad who was struggling with his instrument loan. It turns out what he really needed was a roommate. He was living in a far nicer apartment than his income would support. So we will have talks like that. We rarely decline a loan, we usually work with our members to put together an application that will succeed, that they will get approved for, and that they can afford. Sometimes that means waiting for the loan while they clean up some credit issues.
So … are these loans actually risky?
Not at all. Our experience is that the risk is minimal because musicians are so attached to their instruments and because people in the arts are highly disciplined, really motivated, smart people. Their incentives may not be centered around the greatest increase to their income, but they’re great customers because all the incentives go toward their loan because it’s their voice. Musicians will pay their instrument loan before they pay their rent.
There really is a viable market for instrument loans that the banks aren’t filling. The knowledge is too specialized, and the market is too small to train people in banks to service musicians. It’s not profitable for big banks. But with the knowledge we have and our cooperative relationship with the members, we’re able to fill that market failure.
Have you ever been on the other side of the equation, a musician looking for a loan?
The bass I play on now is a really nice 200-year-old English bass. It’s the bass I played my auditions on and the one I still play today, 24 years later. I was having some work done on my previous instrument at this bass shop in New York and as I watched them do the work, I asked if they had anything interesting. He said he had a bass in that he was trying to decide if he wanted to sell in Germany or Japan—the owner wanted to sell it fast. I played it and I just knew it was my bass, but I didn’t think I could afford it—until I called the credit union and talked it through. They said yes. I drove right back from Boston to New York the next day to pick it up.
Is that a common story with your clients? They find “the one” then they need the money quickly?
It’s that or they’re talking to an instrument maker or dealer about an instrument, but they don’t think they can afford it, and the dealer says, “Well, talk to the people at Noteworthy.” That’s where we get our referrals.
Philanthropy Daily covered another credit union whose business model is locally focused and thus not scalable in principle. You say Noteworthy, on the other hand, is moving into national lending. How did you decide to go in that direction?
People came to us for musical instrument loans. So we’d give them a loan locally, then they’d take that instrument and go get a job in another orchestra and tell their colleagues how they were able to borrow money with their instrument as collateral, and they would call us. Then the instrument dealers and makers also started referring customers to us. Why? Because if you’re hand-making instruments and you only make 8-10 a year, if you sell two more instruments, that changes your lifestyle! Instrument makers have been our best advocates.
We’ve been able to return the favor with them recently with the PPP loans. We realized as COVID went on longer that the businesses and small shops and artisans who make these instruments were in real jeopardy. So when PPP came along we went after that headfirst. We reached out to the instrument makers and the Violin Society of America. We doubled our portfolio in 10 days.
Was that primarily you coming along to help those businesses who didn’t know how to jump through the hoops?
You couldn’t get an answer to a question. You couldn’t reach anybody. People were going to big banks and being ignored or putting in applications and waiting for weeks and weeks without hearing anything. We realized that the banks were not available to meet the needs of our vendors. They were processing applications in the order of loan size. The big corporate clients were getting great service—though still not much communication—and the small ones were just being ignored. People were coming to us, and they were grateful for the hands-on service, the seed, and most of all, the answers.
Do you think those smaller instrument makers are going to be able to come back from this?
We’ve heard from quite a few of them who have said that without the PPP loans they would have been out of business. And this is a golden age of musical instrument making. It’s like Italy in the 18th century. There are so many incredible instrument makers. But the shops are small. They don’t make a lot of money. They’re doing it because they have to do it—it’s their passion and their calling. To see people like that have their business fail and lose that cultural genius just because of COVID seems crazy. We were really glad we were able to keep them going. It’s good for us, it’s good for musicians, and it’s good for music in general.
Has there been a rise in arts loan applications for works responding to COVID—audio visual equipment for livestreaming, etc.?
Actually, what we’ve seen is people reducing their debt. As soon as it became clear that COVID was going to be around for a while, we started seeing a decrease in loan delinquencies. It sounds counterintuitive, but people are protecting their instruments. People have been paying off instrument loans early just to feel more secure that they’ll be able to come out with their instrument and their lives intact.
As a 501(c)(1), Noteworthy Federal Credit Union cannot accept donations, but are there other ways philanthropists can support your musicians?
In our case we have enough demand that we’re always looking for deposits. We are insured by the full faith of the federal government up to $250,000 just like FDIC. If someone is depositing money with our credit union, we’re loaning that money out to people who are working in the arts. It’s making it possible for them to do their work. So something as simple as putting part of your money in cash at a credit union allows it to do some good. And it’s insured and you make money on it . . . what’s not to love!