What gives? The problem is twofold. First is the widespread notion that banks aren’t lending, a misconception that is discouraging business owners from applying for loans. And if that misconception isn’t holding people back, the disparity between the number of approved loans and issued loans indicates that economic uncertainty is. Instead, business owners are practicing extreme caution.
In July 2012, Riverview announced an effort to issue $100 million in new loans to our community; now ten months out and our employee-owners are proud to be on track with that goal, boasting $85 million in new local lending since the campaign’s launch. By its very nature, business lending is labor-intensive and individualized, and acquiring those loans has been anything but easy. But financing small businesses – at least from your local bank’s perspective – is worth the hard work. According to the National Small Business Association, small businesses create nearly two-thirds of all net, new jobs and employ nearly half of the private-sector workforce. Lending to these organizations not only helps community banks grow and improves the quality of their loan portfolios, it also aligns with their commitment to community by fueling economic growth in the regions they serve.
Myth No. 2: Bigger means safer
You might think that your money is safer at big banks, but the vast majority of our nation’s small community banks are strong, safe and stable, and the size of your bank has no impact on the safety of your deposits. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 on deposit accounts. Depending on your ownership category, you might even qualify for coverage exceeding that amount. Plus, small, community banks’ focus on local families and businesses means their employees and their families live, work and play in your communities and are generally available to answer your questions and concerns directly. If you are unsure about your coverage, ask your local banker or visit the FDIC’s online Electronic Deposit Insurance Estimator at www.fdic.gov/edie.
Myth No. 3: Banking is all about enhancements
Just the other day, I caught myself explaining the old bill pay process to a younger employee. Remember when bill pay, which most of us manage online today, was automated by phone? I do, and I wouldn’t go back to the old process if you paid me. Technology is great; it can make your life easier. But, when choosing a bank, there are more important things to consider than which institution has the most ATMs, best online banking or the convenience of mobile deposit.
That’s because all these automations are not intended to replace local, personal service; they are intended to enhance it. No matter how many high-tech perks banks offer, banking is still about relationships, and no financial institution understands that commitment better than your local, community banks. Small businesses in need of financing can attest to the differences between the loan application processes at big banks and community banks. While big banks’ decision-making is a long-distance, computer-based judgment, community banks’ lending decisions are strengthened by face-to-face relationships with applicants and an intimate knowledge of the local economy. Overall, community banks are more effective small business lenders. Community banks excel at customized assessments and solutions; computers do not.
The bottom line
There are a lot of theories about banking out there, but when it comes to making decisions for your own business, your best bet is to examine what services you need from a financial institution and independently compare your options. Just because a belief is widespread, doesn’t mean that it’s true, but prescribing to notions without due diligence could mean you miss out on the opportunity to help your bottom-line.
Kim Capeloto is the executive vice president at Riverview Community Bank.
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