Tag Archive for 'independent banks'

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!

Your small business, your banker and economic recovery

A small business is like the human body in at least two ways: To survive, it must have both nutrition - food and water - plus oxygen. For a business, nutrition is profits, and its oxygen is cash flow. And similar to the body, a business can survive for a while without the nourishment of profits but not very long without the breath of cash flow.

Arguably, the greatest reasons small businesses fail is they run out of cash. And as improbable as this may seem, even businesses with plenty of sales revenue - if cash is not collected in time - can fail. Every growing business, large or small, needs access to cash resources that can smooth out the operating cash rough spots. But for a small business, those resources are few in number, with the primary source being a loan from a bank.

If there is one thing that I have harped on for the past dozen years, it’s the importance of a small business establishing and maintaining a close working relationship with a bank. Furthermore, a decade before the financial meltdown of 2008-9, I began encouraging small businesses to make sure at least one of their bank relationships was with an independent community bank.  That advice turned out to be prophetic.

Recently, on my radio program, The Small Business Advocate Show, I talked about getting your small business ready for the coming expansion and building better banking relationships with an outstanding member of my Brain Trust, John Dini. We discussed some of the elements of growth that you should begin planning for right now, including a capitalization plan that includes a closer relationship with your banker. John is the leading Tab Boards franchisee in the U.S., President of Management Performance Network and author of 103 Tips for Better Hiring.

Take a few minutes to listen to our conversation and, as always, leave your thoughts on banking relationships and how you’re getting your business ready for the coming expansion. Listen Live! Download, Too!

The Blasingame Small Business Banking Rules-of-Thumb

For many years, I’ve made the following recommendations to small businesses with regard to their banking relationships, called: The Blasingame Small Business Banking Rules-of-Thumb:

1st Blasingame Small Business Banking Rule-of-Thumb
A small business should have at least two banking relationships. If you’re turned down for a loan at one bank, you have another place to go where the person already knows about you and your business. One primary reason for this rule is because if only one banker knows you and your story, when he or she gets fired, promoted or otherwise leaves the bank, Murphy’s Law will dictate that it will happen when you most need a favorable banker.

2nd Blasingame Small Business Banking Rule-of-Thumb
At least one of the banking relationships should be with an independent community bank – that means locally owned and managed – and preferably your lead bank. I’m not picking on big banks, it’s just that most small businesses need to be given a little extra consideration for their character and past performance, which is typically not as forthcoming in a large bank.

Loan decisions made by large banks have two elements that may not give a small business this extra consideration: 1) The actual decision is made by a loan committee in another city, by people who probably don’t know the business owners; 2) They rely heavily on what is called “credit scoring,” which is a computer program – each bank has its own proprietary model – that receives quantifiable information and produces a “score,” let’s say, 17. If this week the bank has decided that only scores of 18 or more are accepted, this loan request will likely be rejected. I’ve never heard of a credit scoring system that includes a variable for the applicant’s character.

Over the years, my Rules-of-Thumb have proven to be valuable to many small businesses. But since 2008, with all of the problems associated with big banks, those who have followed my advice were much less likely to find themselves without access to credit, since every independent community banker I’ve talked with in the past 15 months has emphatically said they had never stopped lending to their small business customers.

Recently, I talked with two presidents of independent community banks about working with small businesses and the health of the banking industry. First, Mike Menzies, who is not only the president of the Easton Bank and Trust in Easton Maryland, but he’s also the new Chairman of the Independent Community Bankers Association (ICBA). Mike’s also a long-time member of my Brain Trust. Secondly, there is Charles Antonucci, President of Park Avenue Bank in mid-town Manhattan.

Take a few minutes to listen to what these two veteran small business lenders have to say. And, of course, be sure to leave your thoughts.
For Mike Menzies:
For Charles Antonucci:

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