Banks and Small Business

Author:     Friday, September 12, 2014 12:00 AM

There are more than 27 million businesses operating in the U.S. of which 25 million have 10 or fewer employees, reports the U.S. Census. Small business continues to be the backbone of the economy and community banks are a big reason they exist. The relationship between the small business owner and the local banker supports the growth and economic well-being of any community.

Sharing a Common Goal

Small business and community banks both want to see the community prosper. Keeping the money in the community creates jobs and motivates people to stay instead of moving to larger cities. The successful community may also see a net gain as other businesses come in from the outside. An economy that is based on small business providing jobs, and community banks enabling small business, becomes self-sustaining.

More Than Just Loans

Community bankers can afford the time to invest in helping local businesses a number of ways. A source of funding is just one way. The Independent Community Bankers of America report that 60 percent of the small business loans given out are by community banks with assets less than $10 billion. They represent only 20 percent of the entire banking industry.

Other ways that community banks can help small business include:

  • Business plans - Resources are often available to review and give feedback on the financial portion of a business plan. Banks that have been in a community for years are aware of the business trends in that space to help a small business owner find their niche.
  • Cash management - Good cash management skills are important, especially in the startup phase of a small business. Bankers can offer advice on how to keep as much cash in the bank for future growth while maintaining current operations.
  • Payment options - Some banks offer a variety of payment options such as credit card processing and mobile payments. Small businesses can give their customers more choices to pay for products and services.

Why Small Banks are Big on Business

Community banks can take on the risk of loans to small business that the larger banks won't touch. This is due to the connection the small bank has with the community. Understanding the local business climate, they are in a position to evaluate a company's impact on the community. Larger banks may rely heavily on credit scoring to decide on giving a loan. The community bank can look at such factors as family history, business reputation and personal character, as well.

Partners in the Community

Small business relies on the small banks to give them a boost to start out right. Creating a sustainable economy in any community means that all of the businesses are contributing with jobs, products and services. Community banks are small businesses, too, as they contribute their financial knowledge to the continued growth of all the business there.


Source: BFI