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Five Reasons, As A Small Business, You Should Be Banking With a Locally-Owned Bank

Five Reasons, As A Small Business, You Should Be Banking With a Locally-Owned Bank

Oct 18 2019

Five Reasons, As A Small Business, You Should Be Banking With a Locally-Owned Bank

By Alex Day

I started my first business dabbling in entrepreneurial endeavors from early childhood.  In recent years, I have also been a vocal advocate of entrepreneurs and small business.  As I have gotten older, I have become more passionate and adamant about the support of small business.  I have evolved from a purely free market philosophy to one that believes that large organizations are inherently flawed and will always evolve to promote their self-interest as an organization.  Whether it be the federal government or Wal-Mart, large organizations don't look out for the little guy and will gladly crush the little guy to accomplish their objectives.

I have reached a point now where I attempt to live by the rule of, "do unto others as you would have them do unto you".  I see now that when running a small business, you should do always do business with other small businesses.  The area that took me a while to apply this was in my banking relationships.  And this should have been one of the first areas that I adopted my "do business with small business" motto.

For several years I was with a multi-national bank.  And this, to be un-named multi-national bank, did not care much about me as a customer.  Now I had some good days with them.  I had a branch manager that was outstanding at customer service and made me feel like I had a real voice as a customer.  She was a great branch manager and was promoted.  And I started all over again, with a less than stellar individual (he might have been great, but compared to his predecessor he didn’t stand a chance).  I had my personal accounts with this bank.  I had my business accounts with this bank.  To make a long story short, I had a single catastrophic event that brought to mind that I am nothing to this multi-national conglomerate.  The treatment I received was horrendous.  And I looked back and remember how many times I would hear, "we can't do that".  Or, "that can only be done at a higher level of management".

There were so many things that were great about being with a multi-national.  Great rates.  ATMs everywhere.  All kinds of products.  But when it was bad it was REALLY BAD.  There are many things that are disappearing in life for small business.  Small banks are one of the things are still around, but they have a hard row to hoe.  They usually don't offer the best rates.  They usually don't have all the services and bells and whistles that the multi-nationals do.  But below are the five reasons I think you should absolutely work with a locally owned bank.

  1. You can actually build relationships.  With a locally owned bank, you may even get the opportunity to meet the President and CEO of the bank.  But as your business grows you will become a known entity.  You won't simply be a number on a piece of paper.  The people at the bank will know who you are and although (with the hyper-regulated environment of banking) they don't have complete flexibility, they will demonstrate more than a multi-national will. 
  2. You mean much more as a customer to a small bank than you do to a big bank. Let's assume you do nothing more than open a business checking account and a personal account with the bank.  Let's look at their annual revenues and look at what you contribute (on a percentage basis) to the revenue of that locally owned bank.  It will be a much more significant contribution than you will be making to the revenue of one of the big guys. 
  3. You can become a known entity to them.  Ever noticed the turnover at the bigger banks?  If you are lucky enough to bank with a big bank that has kept the same branch manager for more than five years, and has a low turnover rate, you are in a rare situation.  The big guys churn people.  And when they are really good, they promote them out of your branch. 
  4. The growth of your business could have a meaningful impact on a small bank. Your goal is to grow your business.  If you grow from a $100,000 a year business to a $20 million a year business, how much of an impact does that have on a big guy?  Not much.  How do you think that could impact a local bank?  It could be significant. 
  5. You are a small business, so WORK with a small business. Do you remember what that feeling is like?  Going to see if you got approved for that loan?  Dealing with banks often times does not feel like you are a "customer;” it can often times feel like they are doing you a favor.  When you deal with a local bank, you are dealing with a small business.  They are more motivated for you to get that loan, or line of credit, than anyone at one of the big guys is.  Do them the favor of working with them.  And close your accounts at the big banks.

Remember that banking with a locally owned bank does not mean that you will not experience frustrations.  The regulatory environment makes flexibility difficult for all banks.  But with a locally owned bank, you at least have the opportunity to build relationships and get that extra consideration, above and beyond the numbers on paper, when there is that opportunity.