If you’re a small business owner, your bank plays an essential role in running your company. Unlike major corporations that rely on capital markets for credit, small businesses typically use bank loans. In fact, the FDIC Community Banking Study reported that banks provided 44% of small business financing, far more than online lenders.
From loans to expand your business to checking and savings accounts that allow you to receive payments and invoice vendors smoothly, your bank can help you manage your business effectively.
As a small business owner, you may be thinking of opening an account with a national bank chain. However, community banks can be especially helpful alternatives for business owners. When you partner with a community-focused financial institution like SouthEast Bank, you’ll experience the many unique benefits that come with banking locally. Member FDIC.
Here are a few reasons you should consider choosing a local bank:
1. You can get personalized service
With a local bank, you can get to know bank staff. More importantly, they can get to know you, your business and its role in the community. Community banks can give you more personalized assistance, offering in-person meetings and individualized consultations to help you with your banking and borrowing needs.
Getting to know our customers’ banking needs help us to offer standout banking products and features. From checking and savings accounts to lending, we strive to offer an exceptional, personalized experience from start to finish.
2. You will support your local economy
When you bank with a community bank, you’re supporting your local economy. Not only does the bank employ your neighbors in the area, but it also supports the community in other ways. Banks often sponsor local schools, sports teams and non-profit organizations, and bank employees frequently serve on community boards. Choosing a local bank helps keep them in operation, benefiting your own neighborhood.
SouthEast Bank, for example, is invested in its communities and customers. From spearheading the SouthEast Scholars program to offering financial education classes at select local schools, we prioritize giving back.
3. You may get lower fees than you’d find elsewhere
Most locally owned banks and credit unions offer a full range of small business banking services, including checking and savings accounts, business debit cards and loans.
However, community banks can often offer better terms and lower interest rates and fees than national banks. Since the major banks have name recognition, people immediately go to them when they need a loan or want to open a new business account. They don’t have to worry about lowering their interest rates or fees to attract customers.
By contrast, community banks lack that recognition, and have to compete for customers. To attract new customers, many offer competitive interest rates and lower fees than major national banks. As a small business owner, that means you may be able to open no-fee checking accounts and apply for low-interest loans for your company.
4. Individualized credit decisions
With major banks, their underwriting requirements are often rigid. They have set criteria for borrowers’ credit scores and income, and their applications don’t allow for individualized attention. Instead, you typically apply online and get a decision based on a computer algorithm.
Community banks offer more individualized credit decisions. As you establish a banking relationship, bank staff learn about your business, character and reliability. They will be more likely to take in factors beyond your credit score when deciding whether to issue you a loan.
5. You can get more immediate results
With community banks, operations are more streamlined, which can mean less red tape and shorter wait times. When you need help quickly, community banks can often provide you with faster service than major national banks.
A key example is the Paycheck Protection Program (PPP) which was announced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP program was designed to help businesses stay in operation and keep employees on the payroll.
Millions of business owners applied for PPP loans. Some who applied through major banks struggled to get their applications submitted, as huge traffic volumes overwhelmed the banks’ systems.
By contrast, many smaller community banks were able to process PPP loans more smoothly. According to the FDIC, community banks’ participation in the PPP program far outpaced noncommunity banks. As of June 2020, community banks held $148 billion, making up 31% of PPP loans held by banks.
When you need rapid results, community banks may give you the edge over major banks. SouthEast Bank prides itself on offering high-quality expertise and customer service, paired with local decision making for a simple, streamlined experience.
What to look for when choosing a bank
When shopping for a bank for your business needs, consider the following factors before making a decision:
- Fees: If you’re planning on opening a checking or savings account, make sure you look for monthly maintenance fees and other recurring charges. Some business accounts are free, while others will charge you a fee for having an active account.
- Account minimums: Some banks will require you to keep a certain amount of money in your bank account. As a small business owner working to grow your company and pay your employees, not being able to access your full account balance can be a challenge. Look for banks with low account minimums or no minimums at all.
- Additional services: Many community banks offer additional business services to cater to their customers’ needs. Depending on the bank, you could take advantage of their payroll services, fraud protection or business retirement options.
While major banks can be appealing for business owners, looking beyond the national banking chains can pay off. By opting for a community bank instead of a national brand, you’re reinvesting in the community. And, you may be able to take advantage of lower interest rates and fees, higher levels of customer service and rapid response times. As you grow your business, working with a community bank rather than a major bank can help you achieve your goals.
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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.