With all the different types of banks available today, it can be hard to narrow down a decision on who to use for your small business financial needs. One of the top financial choices to consider within your local area is selecting a community bank. According to FDIC statistics, as of 2010 community banks represent 92.4% of all banks while controlling 14.2% of total bank assets in the United States.
Community banks play a vital role in the economic growth of their local neighborhoods by lending to “creditworthy borrowers in their regions”. By combining the traditional bank functions with the added facet of being relationship lenders, community banks excel at delivering profitable growth to their communities.
Below are several reasons community banking is important for small business merchants:
Customer service is of the utmost importance to community banks, as they service their local community on a daily basis. They focus on “relationship banking” with their clients and merchants, maintaining a touch on personalization and customization for the community they serve. Their personal knowledge is great for merchants seeking more of a “one-on-one” financial approach within their area. One of the main features community banks concentrate their efforts on is the needs of the local families and businesses, making them a great asset for small businesses in the area.
Local Economic Growth
In addition, small businesses tend to thrive better by choosing a community bank. Community banks provide almost one-half of small-business loans, more than 40% of farm loans, and over one-third of commercial real estate loans. As a result, lending to local businesses helps nurture the local economy by increasing services and trade. Big banks, on the contrary, are not tied down in the specific areas they operate, and instead use the community’s deposits for investments in other regions. Selecting a community bank may also give small businesses an advantage of being approved for a loan, as they emphasis their decision more on discretionary spending rather than focusing on credit scoring like big banks do.
Same Services, Lower Cost
Community banks offer the same services as larger banks: online bill paying, debit/credit card processing, and loans. However, the fees associated with these services are exponentially lower at community banks. Some of the amenities community banks can save costs on for local merchants and investor’s include better interest rates on savings, loan options, and better terms on credit cards. Likewise, community banks tend to lend to small businesses more so because of the “relationship banking” they create with their clients.
Commitment to Community
Community-based banks tend to have more of an invested interest in their borrowers, as they benefit when the local community prospers. As a result, many local banks are more involved within their communities and provide assistance and resources that national banks may not be able to offer. Their core concern involves understanding the needs of the community, thus making them a viable choice for small businesses.
It is clear that community banks are a noteworthy option for small businesses. By developing a relationship with their merchants, supporting local economic growth, and offering lower banking services, it should be an easy decision to grow your business by selecting a community bank.