Entrepreneurs in New York state have found community organizations more lenient in issuing loans than their corporate competition in small business banking.
Fostering community
In the past several years, despite community banks' comparatively low funds, more than half of small companies in the state have chosen to lend from smaller local banks.
Benjamin M. Lawsky, the Superintendent of New York's Department of Financial Services, asserted in a statement that small banks are essential to the financial health of towns, cities and boroughs everywhere.
"Community banks focus on the unique needs of their communities," he said. "They build strong customer relationships which help attract local retail deposits. These banks take deposits from their communities and then typically recycle them back into their communities in the form of loans."
The report on small business lender preference was released by the state through its Community Banking Report this month. Issues covered by the Department of Financial Services ranged from an assessment of current circumstances, new obstacles being faced in the industry and how the state continues to facilitate progress among banks with less than $10 billion in assets.
It is reflected in the state report as well as a piece from the Delta Business Journal that two major trends moving forward are access to mobile banking through community banks and the ability of local financial businesses to work with new upcoming federal regulations.
The future of local banks
Planters Bank and Trust CEO Jimmy Clayton of Mississippi says that the adoption of mobile banking applications by small banks will not diminish the valuable face-to-face business that community-based institutions are particularly good at.
"All banks have similar technology, but customer service is usually the deciding factor in customer satisfaction," he said. "Actually, improved technology has allowed bankers more time to spend helping customers achieve their financial goals."
The Delta Business Journal suggests many small business owners may choose to take loans and conduct daily business with community banks because customer service at these institutions is prime.
This factor combined with the flexibility among small banks has made such businesses excellent resources for loan-seeking entrepreneurs, notes the New York DFS. According to the state's report, the smaller the bank the more likely it is to approve a small business or agricultural loan – banks holding less than $1 billion provided 43 percent of advances for farming and 28 percent of borrowed funds intended to start or maintain a business.