Small Banks Help Small Businesses

by Erica Bell

The convenience of a large banking firm, such as Wells Fargo or Bank of America, may seem like an important factor when you set up your small business banking accounts. However, a number of small businesses have begun to switch to smaller banks. Smaller, local banks often provide better customer service and are more likely to loan to other small businesses. Here are a few reasons why you should consider making the switch.


–          In 2010, MultiFunding conducted a study that found that as big banks increase in size, their lending to small businesses decreases.

–          The analysis of 1,000 small business loan applications on found that approvals in August 2011 by big banks rose half a percentage point from May to 11.1 percent, while small bank approvals jumped two percentage points to 47.5 percent.

Though small and midsize banks control only 22 percent of all bank assets, they account for 54 percent of small business lending, according to Federal Deposit Insurance Company data from the third quarter of 2009 charts.


–          When a small business sets up accounts with a smaller bank, the chances that the money is used for loaning to other small business is greater.

–          You may also have a greater chance at getting approved for a loan. Small lenders are less likely to focus solely on credit scores and financial statements during the evaluation process and more likely to rely on small business owners’ character and relationships (study).

–          By setting up your small business banking with a local bank, you may be able to find a bank that is a better fit and more flexible in helping you meet your goals. Larger banks tend to have fewer options and stricter guidelines when it comes to checking and savings accounts.

It’s becoming clear that small banks are more likely going to lend small businesses the money they need. But, no matter what kind of bank you choose, you need to do the research into all the possible fees, loan rates, and services provided by your bank.




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