Community banks’ preferred small business lender status is well documented, but as it turns out community banks may play an even bigger role in serving the financial needs of America’s economic engines than previously thought.
According to a forthcoming study from the FDIC, its 2016 Small Business Lending Survey undercounted community bank small-business lending by at least $38 billion in the fourth quarter of 2015.
This updated accounting provides a more accurate picture of the extent of small-business lending by community banks, while also examining how these banks use local market knowledge and their relationship-based lending model in their loan decisions.
Community banks not only rely less on standardized small-business loan products (9 percent) than their larger counterparts (65 percent), but they also serve small businesses at their earliest stages (roughly 80 percent lend to startups), according to the survey. These customers often fall outside of large metropolitan areas (85 percent of community banks lend outside of dense populated regions), which makes community banks’ impact on their local economies even more significant.
These stats seem to support what small businesses should look for in a banking relationship:
- knowledge of market conditions;
- decision-lending authority; and
- familiarity with federally subsidized small business loans.
And yes, small business customers also want a more personal—and sometimes even an advisory or mentoring—relationship with their bankers.
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