As a small business owner, you practice what you preach. You buy local, eat local, and when you go on that hard-earned vacation, you even sleep local. But do you bank local? In honor of Community Banking Month this April, consider where you choose to save, borrow and invest your money.
What It Means to Bank Local
In addition to big banks and local banks, a variety of online banks and nonbank financial institutions willing to hold, lend and manage money. Big banks like Bank of America and Wells Fargo have branches across the country, which incentivizes them to implement rigid processes and inflexible terms. Meanwhile, online banks may not have any branches at all, which makes them appear impersonal and elusive.
Community banks are locally owned and credit unions are member owned. In both cases, the institution’s owners, decision-makers and customers are all part of the same community. As a result, the money circulating between the bank and its customers is always moving locally, not to distant shareholders.
Think about the reasons you shop local. Many of those reasons apply to local banking. From customer service and unique products to flexible terms, local financial institutions resemble your own business, making them a natural partner.
Capital and Cooperation
At community banks and credit unions, lending decisions are made on Main Street, leading to better outcomes for small businesses. First, local businesses may have better access to capital by going through local financial institutions than relying on big banks. The Independent Community Bankers of America finds local banks provide more than 60 percent of all small business loans. Local banks and credit unions are often more familiar with local businesses and may be willing to extend credit or offer flexible terms.
Second, local businesses have a closer relationship with their local financial institutions than with big banks. In the Federal Reserve’s 2019 Small Business Credit Survey, 79 percent of independent businesses that used community banks reported they were satisfied, compared with 67 percent for large banks and 49 percent for online lenders. Small businesses can find a supportive, long-term partner in local banks and credit unions.
Use your platform as a small business leader. Move money to a local bank or credit union to invest in the local economy and find a long-term financial partner. While you build up the community, a community-based financial institution helps you build your business.