Tag Archive for 'small business banking'

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!

Small business banking in 2010

What will small business banking look like in 2010? independent community banker, Mike Menzies, joined me on The Small Business Advocate Show to talk about some of the key issues facing small businesses as they attempt to build better banking relationships in 2010.  Mike agrees with my 2010 prediction that the national banks will continue to be MIA in terms of small business lending. Mike also reported on some of the new financial regulations that are being proposed by Congress and how they will likely have a negative impact on his banks ability to serve small businesses.

Mike Menzies is President and CEO of Easton Bank and Trust in Easton, Maryland and an original member of my Brain Trust. Take a few minutes to listen to this interview and tell me about your recent banking experiences. Listen Live! Download, Too!

Reviewing Blasingame’s 2009 Predictions and accuracy

It’s time to review my 2009 predictions from a year ago and tally my accuracy.

Prediction: In 2009, Main Street and small businesses, not Wall Street, will suffer the most. Reality: Unemployment 10.2%, Dow Jones up 55%, +1.

Prediction: The recovery will begin in the second half of ’09. Reality: Technically, the recession ended Q2, +1.

Prediction: The credit crisis will hurt business start-up opportunities. Reality: Record low new businesses, +1.

Prediction: Retailers and big-ticket sellers will suffer the most in 2009. Reality: This one was easy, +1.

Prediction: The Obama administration will produce a successful small business economic relief plan. Reality: Shouldn’t have said “successful,” -1.

Prediction: Community banks will thrive in 2009. Reality: Except in states hit hard by real estate speculation, community banks have been the bright spots in the economy, +1.

Prediction: Unprecedented government intervention will not bear economic fruit until the second half. Reality: “Cash for clunkers” in Q3, +1.

Prediction: The Obama administration will not push the pro-union Employee Free Choice Act in 2009. Reality: Bingo! Expect it in 2010, +1.

Prediction: Congress will not pass a “cap-and-trade” bill in 2009. Reality: House 1/Senate 0, +1.

Prediction: The Obama administration will not recommend any tax increases. Reality: No new taxes, but many “recommended,” -1.

Prediction: The Obama administration will push hard for healthcare reform in 2009. Reality: Economy and health care reform have been 1a and 1b, +1.

Prediction: Al Franken, will be the next Senator from Minnesota. Reality: Franken was sworn in July 8, 2009, +1.

Prediction: The Fed will begin nudging interest rates up in Q4. Reality: Didn’t happen, -1.

Prediction: Oil prices will average below $65 per barrel. Reality: 2009 average was $59.04, +1.

Prediction: The electorate will rise up against the federal government over poor leadership and anti-growth policies. Reality: Tea Parties, +1.

Prediction: Wall Street and Washington created most of our economic problems, but Main Street small businesses will lead the recovery. Reality: Any questions? +1.

After a bad ’08 (7 for 15), I went 13 for 16 in ’09, putting my 9-year average at 70%. How’d you do?

Economic recovery and the banking industry

One of the most significant shifts that resulted from the current economic gyrations is in the banking industry. Of course, we’ve all witnessed the consolidation of the national banks. Perhaps you’ve even paid attention as some of the 2nd tier banks have either failed, been absorbed by a bigger fish, or in some way had to make major adjustments in their business model.. In the words of the Borg, “Size is irrelevant; resistance is futile; all will be assimilated.”

One of the pieces of advice I’ve given small business owners for over 11 years now is to make sure at least one of your banking relationships is with an independent community bank (a/k/a locally owned and operated). If you’ve followed this advice and have maintained a good working relationship with that bank, your small business probably can borrow what it needs to get through this rough spot. So far, the independent banks – which did not put sub-prime mortgages on their books and aren’t lined up for government bailout money – have seen very little change in the way they do business with their small business customers.

Regardless, every small business owner should become more attuned to adjustments in the national banking environment, especially over the next couple of years. There will be changes, at a minimum with regard to regulations, at all levels of the banking industry.

Today I interview on my radio program bank economist from National City and Brain Trust member, Richard DeKaser. We discussed the banking landscape and of course, the economy. Richard always has thoughtful and valuable insights that are worth listening to, which you can do by clicking the link following this paragraph. But first, remember what I’ve always told you: An uninformed banker is a scared banker, and no one ever got anything out of a scared banker. So take your banker to lunch this week.

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