Need a loan for your small business? Your best bet is to check out a community bank. The bulk of small business loans come these days from smaller community banks, In fact, community banks provide more than 50% of small business loans to small businesses nationwide, according to the Independent Community Bankers of America, which represents more than 6,000 community banks.
ICBA is joining the Small Business Administration in celebrating National Small Business Week, May 4-8, reminding business owners about the critical role community banks serve in supporting local small businesses and is encouraging consumers to Go Local with banking, dining and shopping.
“Community banks understand their local markets, communities and neighborhoods better than anyone else. They understand the unique situations local entrepreneurs and small business owners face. After all, community banks are small businesses themselves,” noted in a released statement, ICBA Chairman Jack Hartings, president and CEO of The Peoples Bank Co., Coldwater, Ohio. “Small businesses are at the center of the nation’s economic prosperity. They create local jobs and economic growth in cities and towns across the country.”
Community banks are typically independently owned and operated compared to multinational financial institutions such as Chase and Bank of America. Community banks collectively hold $2.4 trillion in loans to consumers, small businesses and the agricultural community. Community banks are prolific small business lenders, providing most small business loans under $1 million to local entrepreneurs and small business owners.
Small businesses often rely on community banks for raising capital, unlike big public companies that can issue new stock or sell bonds and commercial paper when they need money. What’s more, many big banks avoid extending credit to small companies because small business loans are time intensive, hard to automate, tough to securitize, and expensive to underwrite and service.
Community banks are embedded in local neighborhoods and tend to focus on relationship banking, Therefore, they are better able to evaluate soft factors in lending decisions, which allows them to make loans when quantitative analysis based on credit scores and financial statements alone would not suggest it.
It is advisable to establish a good relationship with a lender, regardless if it is a community banker or national institution, before your business needs outside capital. That is you want to build a rapport with a banker long before needing to borrow money. This person isn’t the local teller who knows your name when you make deposits. This is a business relationship banker who understands your industry—a trusted financial adviser on par with your accountant or lawyer.
To find a local community bank in your area visit ICBA’s Community Bank Locator at www.banklocally.org.