It is widely recognized that small businesses are instrumental to driving the economy on both local and national levels. In order for small businesses to grow and help push the economy forward, they must have proper financial support.
Where can small businesses turn for this much needed resource? The answer lies with community-based financial institutions — both banks and credit unions — typically those with under $10 billion in assets.
Small businesses across the nation represent the powerful belief that hard work and ambition will result in success. The financial crisis saw those dreams washed away. Now, as small businesses owners and entrepreneurs take steps toward recovery, they should seek out their local community-based financial institutions.
By many accounts, small businesses employ 70 percent or more of U.S. workers, and they are historically the leading creator of net new jobs. Their ability to expand, purchase inventory and hire staff rests largely on the ability of financial institutions to meet their credit needs. As lubricants of their local economies, community-based financial institutions are catalysts to help small business owners, entrepreneurs and consumers achieve the promise of an American dream. These institutions represent Main Street, and strive to improve the communities they serve.
When making financial decisions, small businesses should view these institutions as trusted financial intermediaries that exist to aid them in achieving their own goals. Community-based financial institutions want to help small businesses grow so they can further stimulate their local economy, which in turn drives our national economic growth.
Credit when your business needs it
The National Federation of Independent Business has reported that small business growth is hampered by reduced access to credit. It is important to note that business decision makers who reported reduced access to credit were possibly looking for it in the wrong places.
According to Raddon Financial Group’s National Small Business Research last spring, 27 percent of small businesses using a top-five bank complained that access to credit had dried up.
However, according to the Raddon Financial Group, only nine percent of small businesses whose primary financial institution was community-based felt that their institution was not making credit available. Of the consumers surveyed by Raddon, 53 percent of all households (both big-five and non-big-five users) agreed that smaller institutions offer more personalized service.
Also according to Raddon’s spring 2011 research, small businesses have reported a higher-than-average level of satisfaction with community financial institutions: 45 percent, versus 32 percent who reported satisfaction with a top-five bank. Small businesses know their customers and communities well and offer personalized service, so it makes sense that they should expect the same kind of treatment from their financial institution.
Community financial institutions serve a disproportionately higher percentage of small businesses as a percentage of total assets; therefore, they strive to provide greater attention to small businesses — a fact that further demonstrates the importance of community-based institutions to fueling their local economies.
As a growing group of Americans, including millenials, continue to demonstrate increased interest in pursuing entrepreneurial paths, obtaining small business loans will become increasingly important.
Across the nation, many community banks and credit unions are making efforts to develop deeper relationships with small businesses. Community-based financial institutions understand the unique challenges small businesses face. As members of the communities they serve, these financial institutions desire to be partners with small businesses, and work together to grow and reinvest in their shared communities.
Louis Hernandez, Jr., is chairman and CEO of Open Solutions, a leading provider of enterprise technologies for financial institutions. He is the author of “Saving the American Dream: Main Street’s Last Stand,” to be published in April.