Entrepreneurs looking for a small business loan may want to consider a community bank, especially with the benefits many small banks offer.
Attorney Katy Welter, a former banker, writes in the Huffington Post that small banks finance 50 percent of all small business loans under $100,000. She also notes that community banks offer the kind of personal service that entrepreneurs can use when starting or maintaining a business.
“Small banks not only loan more money to small businesses; they also help keep them in business by providing tremendously valuable advice,” writes Welter.
In fact, Welter notes that community banks have what is termed “soft information,” such as knowing that a particular borrower has the business experience needed to succeed despite the lack of an extensive credit history. This kind of intimate knowledge of the community they serve makes small banks a valuable resource for small businesses.
Tom Hoenig, president of the Federal Reserve Bank of Kansas City, agrees. He recently testified before the U.S. House of Representatives and said that community banks have “strong relationships with their customers,” according to the New Mexico Business Weekly. He warned Congress that complicated regulations and emerging technology could put small banks at a disadvantage to larger banking institutions.