Why Small Businesses Need Their Bank

Local banks offer important services to small businesses

7/21/2014 2:00:00 PM
There are many necessary ingredients that are part of the recipe for creating a profitable business. A good location, motivated employees and great service are some of the more obvious ingredients, but when you look closely at a thriving small business, it becomes obvious that its bank plays a huge role in its success. Forming a relationship with a bank in your community can help your small business grow and stay successful in a variety of ways. 

“Part of a community bank's mission is to help the neighborhood thrive,” states Christine Lagorio-Chafkin from Inc.com. “In the post-credit crisis economy, there's a lot of movement toward small banks – especially in the small business world.” 

This is because small, community-based banks like North Shore Bank have typically proved more likely to lend to small businesses than larger banks. This means that whether you’re looking to grow your business or fund a new start-up, you don’t have to stray too far outside your neighborhood to find funding. 

“Small banks regularly finance businesses that big banks have turned away,” states Stacy Mitchell for the Huffington Post. “Although small and mid-sized banks ($10 billion or less in assets) control only 22 percent of all bank assets, they account for 54 percent of small business lending. Big banks, meanwhile, allocate relatively little of their resources to small businesses.” 

Small financial institutions say yes to more small businesses because they typically use a more robust way to determine whether or not to approve a loan than the simple credit scoring method favored by most large banks. While a credit scoring method uses a computer formula to analyze hard facts about the business, we are better able to look at the whole picture. 

“Because big banks are run from afar, it's impossible, or at least very expensive, for them to obtain the kind of qualitative information about risk that local bankers pick up naturally by being part of the community and interacting with borrowers,” states Mitchell. 

Online-only financial institutions are in the same position as large banks, making them less likely to make lending decisions based on all relevant information about your small business. This is because they aren’t a part of your community and are therefore forced to rely on clear-cut data to make loan decisions without the ability to truly understand what your small business needs to succeed. 

When you work with a local financial institution like North Shore Bank, you have the opportunity to make your case directly to someone who is part of your community. Not only can this fact help you find a loan more easily, the process may also be faster because the person you speak with will not have to pass the decision-making process along a large chain of higher-ups. 

“Relationship managers at community-based [institutions] often have more discretion than those at a unit of a big institution and they may consider small-business lending to be their bread and butter,” states the Wall Street Journal. 

Aside from a loan, North Shore Bank can also set up your business with a small business credit card. Obtaining a credit card can help your small business make fast purchasing decisions, build good credit and even earn rewards. If you travel frequently for your business, you may be able to earn miles through a credit card. Cash back is another frequently available credit card reward that can help your business save money. 

“It is often much easier and faster for start-ups to open a [credit card] account than to secure a line of credit from a [financial institution],” according to the Wall Street Journal. “And a [credit card] account is also a good way to establish credit in a business’s name.” 

The emphasis that local financial institutions place on helping the community doesn’t only benefit your business when you’re applying for a loan or credit card. Forming a bond with your local financial institution will help your business in hard times for many years to come. 

“The most important thing you have with your [financial institution] is not money: it's the relationship you have," states business consultant Rich Sloan for Bankrate.com. 

If you have any questions and want to see how we can help your business, please don’t hesitate to give us a call. 

Related Blog Posts

North Shore Bank Wraps Up Another Successful Free Community Shredding Day

Full story...

Five Innovations That Can Save Your Business Money

Cut down your expenses while still running your business to its fullest potential Full story...

Winning Saving Strategies That Can Help Grow Your Money

Full story...