Are Small Banks the Best Choice for a Small Business Loan?
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With the economy finally starting to pick up, small businesses are looking for more capital, and they might best be served looking to smaller banks.
This NPR story suggests that while large banks are willing and able to make huge loans to big companies, for many of them, a small business loan is, well, just more work for very little profit. In those situations, small business owners may have better luck with smaller banks.
"In comparison, for smaller banks, the community banks, their business is small-business lending. And that's the best choice, in our opinion, for small business to go to get a loan,” says Ami Kassar, CEO of the small-business-loan broker multifunding.com.
Still, it remains a difficult lending environment. According to Forbes, small business loan approvals by big banks (those with more than $10 billion in assets) dropped from 10.9% in March to 10.6% in April; loan approvals at small banks fell from 47.6% to 45.9%. Both supply and demand of small business loans dropped in April for the first time this year.
We at FreeEnterprise.com have heard firsthand stories of small businesses struggling to access capital. A few months ago, we wrote about Arizona-based Precise Corporate Staging. In 2009, owner David Stern had a difficult time securing a new loan in the midst of the economic downturn and a tightening regulatory environment.
“Five different banks turned us down. They either didn’t like the business we’re in, which is capital intensive, or they didn’t like the fact that there’s risk involved. But every loan—and every business—has risks.” Finally, a Chase Bank representative contacted Stern to find out why his company wasn’t banking with Chase. After a long process, Stern says that he secured a new loan through Chase.
The lesson here is clear: there’s a bank out there somewhere that will lend to a small business just like yours – you’ve just got to be patient and keep looking.