Tag Archive for 'banking relationship'

Small Business Advocate Poll: National Bank, Independent Bank, or Credit Union?

The Question:
With which of these three do you have your primary business banking relationship?

60% - National or large regional bank

36% - Independent community bank

4% - Credit union

My Comments:
In our most recent online poll, over 60% of respondents to our most recent poll chose “National or large regional bank” as the financial organization they have their primary relationship with. A little more than a third chose, “Independent community bank,” and only 5% said “Credit union.”

As you may know, for most of two decades, I’ve advised small business owners that not only should one of their banking relationships be with an independent community bank, it should be their primary bank - the one that has your deposit account and is your go-to bank for a business loan.

Blasingame’s 2nd Law of Small Business states: It’s redundant to say “undercapitalized small business.” This truth is why small businesses need a bank relationship that’s heavy on the relationship part; with a bank that has one of its founding principles to serve small businesses in the community, including making local loan decisions by humans, not computers.

I never said there was anything wrong with the big banks. In fact, I have recommended that small businesses should have a second relationship with a larger bank. One good reason is because if your business grows to a point where you have multi-millions in annual revenue, you could outgrow your beloved community bank and that’s when only a large regional or national bank will do.

But my advice to maintain a relationship with a locally-owned and governed community bank turned to prophecy when, in 2008, the national chain banks and the large regionals got caught up in the financial crisis and they basically abandoned small businesses. They didn’t do this to be mean; they did it to survive.

Big banks are trying really hard to recover the ground they’ve lost in the past three years, so perhaps their plan is working. Also, loan demand by small businesses is still very low, so the computer-generated, credit-scoring method of loan evaluation practiced by the big banks is not yet putting pressure on these relationships.

Nevertheless, I still believe that, regardless of any other banking relationship, a small business should have an active relationship with an independent community bank - if for no other reason than long-term survival.

Recently on The Small Business Advocate Show I talked with my friend and Brain Trust member, Mike Menzies, President of Easton Bank & Trust in Easton, Maryland about the independent community bank landscape and how independent banks are faring in this economy. Click on one of the links below to listen or download.

The economy, small businesses and independent banks

The independent community bank landscape

Check out more great SBA content HERE!

Take this week’s poll HERE!

The facts on small business and banks

Listening to pundits and politicians, you’d think banks were intentionally hurting small businesses and the economy. When a Senator or “Talking Head” says, “This economy needs banks to start lending to small businesses again,” you might think they know what they’re talking about. They don’t.

The NFIB Small Business Optimism Index is the gold standard of small business surveys. If you track the monthly results of Dr. Bill Dunkelberg’s work on his Index, as I have on my radio program for more than a decade, you will see that throughout the entire period since the Great Recession began in 2008, more than 90% of small business owners have consistently reported that their “credit needs are being met.”

It’s true that the big banks curtailed lending while getting their own balance sheets under control. But out here on Main Street USA, if your small business qualifies for credit and wants it, you can get it from either an independent community bank or credit union, if not from one of the national banks. The problem is not credit availability; it’s demand. Like everybody else on Planet Earth, small businesses are deleveraging.

We wanted to know a bit more about the banking relationships of small business owners, so recently, on our website and weekly e-newsletter, we asked this question: “What type of bank do you do business with?” Here’s what we learned:

Our respondents who do business with a “large regional or national bank,” were barely more than those who said they trade with a “local community bank,” coming in at 38% and 36%, respectively. The third option of our poll, “a local credit union” – which are increasingly proving their relevance to small businesses – was chosen by 15% of our sample. And finally, a little more than one-in-ten said they needed a bank.

A week later, in a companion poll, we asked our small business audience: “Are you happy with your current banking relationship?” Seven out of ten said yes and 17% said no. And the group who said they “would change banks if they could,” came in at 13%.

The results of our unscientific online polls are backed up by the findings of several highly regarded surveys, like Dunkelberg’s NFIB Index: Main Street small businesses are dealing with many challenges in this not-so-great recovery, but access to credit is not one of them.

Uncertainty is suppressing small business loan demand, not banks.

I talked more about banking relationships recently on The Small Business Advocate Show. Click here to listen or download my conversation on how happy small businesses are with their banks.

For more great SBA content, click HERE!

Working capital loans & independent community banks

Results of the The Small Business Advocate Poll from March 14:

The Question: As you grow your business over the next year, it’s likely that you’ll need a working capital loan to augment operating cash flows. If so, which of these options are you more likely to choose?

13% - National or large regional bank

31% - Independent community bank

22% - Credit Union

34% - “We don’t need no shtinking bank loan!”

Jim’s comment: For over a decade, I’ve been telling small business owners that their most reliable banking relationships, through thick and thin, would be one with a locally owned bank or credit union that practiced relationship banking. It’s good to see that of those who would currently consider using financial leverage, 80% would choose an option where relationships are valued more than a computer generated credit score.

Recently on The Small Business Advocate Show, Jim discussed the importance of having a relationship with an independent community bank with Gary Moore, founder of The Financial Seminary and author of several books, including Faithful Finances 101 and Spiritual Investments. It’ll only take 8 minutes to listen to what Gary has to say, he’s a pretty smart guy, and tell us your banking experiences - good and bad.

In praise of the independent community bank with Gary Moore




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