By: Julie Story
Small businesses have often been labeled the backbone of America, employing millions of workers and providing pivotal services to communities of all shapes and sizes. But small businesses have been hit especially hard by the economic downturn, prompting a significant amount of tax breaks, legislation and incentives to help smaller companies obtain the funding they need to grow their operations.
Despite these aims, small business lending remains crippled and a recent CNBC article written by guest columnist and Open Solutions CEO and chairman Louis Hernandez highlights the growing benefits of partnerships forged between small businesses and community banks. Hernandez notes that community banks and credit unions are in a unique position to provide more affordable small business banking products than mega banks, which remain hesitant to extend the credit companies need to hire new employees, launch new products and purchase equipment.
According to the National Small Business report conducted by the Raddon Financial Group, 27 percent of small businesses that belonged to a large financial institution said they believed access to credit had dried up. This is in comparison to only 9 percent of companies that banked with community banks or credit unions and gave a similar response. Further, customer satisfaction research shows favorable sentiment is lower with small businesses that belong to top-five institutions vs. community banks. Thirty-two percent of small businesses report feeling satisfied with a top-five institution, in contrast to 45 percent that are satisfied when working with a community bank.
Economic stability remains volatile, Hernandez explains and lending standards are likely to remain tight among the nation's largest banks. In response, he predicts more small businesses will overcome lending obstacles by turning toward community banks and credit unions.