FDIC: Community Banks Fund 42% of Small Business Loans

ATLANTA, GA (October 9, 2018) - Local banks hold 42% of all small business loans in the United States, a new study by the Federal Deposit Insurance Corporation (FDIC) found.

“Small businesses comprise almost half of private-sector employment in the United States, and banks are the most common source of external credit for these businesses. Despite holding only 13% of banking industry assets, our data shows that community banks hold 42% of small business loans,” FDIC Chairman Jelena McWilliams said. “In light of ongoing consolidation in the banking industry, banks’ ability to meet the credit needs of this important sector is of vital interest to the FDIC.”

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Oakland Establishes Public Bank to Invest Money in Local Community

OAKLAND, CA (October 8, 2018) - Oakland will establish the first city-owned public bank in the United States, with ownership shared by Oakland, Richmond, Berkeley and Alameda County. Local residents’ distaste for corruption on Wall Street inspired this initiative, to avoid spending millions on debt servicing and transaction fees at big banks and reinvest money into the community.

The Bank of North Dakota is the only other public bank in the US and has proved to be a success thus far, earning $136 million for the state last year in its thirteenth consecutive year of profits. $30 to 50 million of these profits fund education, infrastructure projects and disaster relief programs each year.

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Community Bank Lending to Small Businesses is Increasing

WASHINGTON, DC (September 19, 2018) - Community bank lending to small businesses grew by 5% from 2010 to 2017, and total business loans grew 11% from $689 billion in 2010 to $765 billion in 2017, the US Government Accountability Office reports.

“Community banks — generally small and locally focused institutions — are important sources of credit to small businesses,” the report said.

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Entrepreneurial Spirit Reignites Community Banks

RALEIGH, NC (September 18, 2018) - Community banks are vital for entrepreneurs - they provide 44% of all small business and farm loans, and are the only banks available in one out of five counties in the United States. As small businesses themselves, local banks can thrive and grow by pursuing key principles of entrepreneurship.

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Arizona: Community Banks Strengthen Local Economy

Image by Inside Tucson Business

TUCSON, AZ (April 26, 2018) excerpt via INSIDE TUCSON BUSINESS - Community banks are critically important in Arizona, providing half of all small business loans in the state despite holding only seven percent of deposits.

A recent Harris poll revealed that 70 percent of Arizona residents place the highest trust in community banks, and yet large banks are increasingly dominating the market. As large banks typically invest their money worldwide, there is less money flowing through local banks into the immediate community.

“Credit unions and community banks are critically important as providers of credit to small businesses as they serve thousands of communities that are underserved, or not served at all, by larger non-community banks across the nation,” Michael Peel of Local First Arizona writes. “They provide a traditional approach to banking with a focus on using local deposits to reinvest in the local community through lending and retaining more dollars in our community through locally-owned businesses.”

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Small Banks + New Technology Are the Future of Business Financing

NEW YORK, NY (March 27, 2018) excerpt via THE FINANCIAL BRAND - Community banks are the most desirable source of financing for business owners, with significantly lower costs and greater transparency than the proliferation of predatory online lenders. However, the lengthy loan application process and challenge of bringing in new clients have held small banks back from serving more of the small business community.

The future for small business lending blends the best of both worlds - community banking and technology. Neill LeCorgne at The Financial Brand writes:

New technology innovations are available that eliminate data entry by scanning in tax returns, automate the spreading of financial data in minutes, price loans faster and more consistently, and score a loan using customized credit factors. What used to take days and weeks to approve and onboard a small business loan can now take organizations hours (or minutes), making quicker decisions available to borrowers who are eager to move forward.

Not only can deploying technology make the process more efficient for bankers and therefore quicker for borrowers – automation of certain steps in the process can also provide a more simplified, enjoyable experience for borrowers.

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