One of the places small business owners and entrepreneurs have learned to be most wary of is traditional financial institutions; namely, banks. However, a not-so-traditional version of a traditional financial institution has become one of the champions of small businesses: community banks.
Week 4: Community Banking
If customer service, local benefits and a surprising lack of underhanded hidden fees is important to you (not to mention a drastically higher approval rating for small business loans), then community banking is definitely worth considering. A simple definition of a community bank is one that is locally owned and rooted in a particular community, and that has less than $1 billion in assets.
As opposed to megabanks, community banks often offer genuine benefits without providing many restrictions to enjoy these benefits. For example, if a community bank offers one hundred dollars to you when you open a checking account with them, it usually happens just like that, no need to keep open multiple accounts or already have an existing, or a minimum deposit of $250, nor hidden maintenance fees for the simple pleasure of keeping your money safe for you. Community banks tend to make it more their mission to help you with your money, as opposed to trying to separate you from it.
Community banks have numerous advantages to both the individual and the small business when compared to larger corporate banks and franchises. Generally, community banks will take into account a broader range of qualifications other than just your credit and current backing, such as character, family history and discretionary spending when making loans. Because they are smaller, community banks have a more intimate relationship with the businesses they work with, and are able to renegotiate as they grow; their flexibility is a quality that makes them highly prized as a resource.
One might wonder why community banks decide to stay as altruistic as they do if it means staying smaller and seemingly unambitious. Community banks do, in fact, have ambitions; they simply differ from the ambitions of mega-banks. Community banks (their name being a dead give-away) invest heavily in their community, and thrive when their community thrives. It is a personal experience highly underrated by the majority, but appreciated by anyone in need of alternate resources. Additionally, community banks are in themselves small businesses, and small businesses need to look out for each other — thus making it in their best interest to aid local entrepreneurs. They make it their business to assist, as they understand and empathize with the needs and concerns of soon-to-be small business owners.
Since a community bank is also a local business heavily involved in the community, they know the needs of said community and the logistics of the area. This is invaluable information for any prospective small business owner.
Check out this recent report from the Aite Group on the benefits of community banking and how to optimize your interactions with your local banks: http://www.aitegroup.com/Reports/ReportDetail.aspx?recordItemID=837
Do you bank with your community bank? How is your relationship with them, as opposed to megabanks? Have you considered looking into their loan process?