When Lisa Ross was shopping around for a line of credit, a major retail bank offered a BlackBerry as an account-opening incentive. But Ross opted instead for the personal service her local, two-branch community bank would bring to the table. "And in terms of granting credit, smaller banks are more hungry for the business," says the 38-year-old CEO and founder of FAO Research Inc., a finance and accounting outsourcing research firm in Cambridge, Massachusetts. "I probably got approved more quickly than I would have at a large national chain."
Ross' experience epitomizes a shift underway in banking, says Terry McEvoy, a bank analyst at New York City-based financial investment firm Oppenheimer & Co. He sees the growth of community banks and entrepreneurial businesses as fundamentally linked. "Community banks are the fastest-growing segment in the banking industry, and the [entrepreneurial] customer, in turn, is the bread-and-butter customer for a community bank," he says. "The business owner uses the banker as his or her CFO in a way, someone to lean on and trust when it comes to making decisions. So it's a very full relationship."
But while community banks may be more receptive to local entrepreneurs, they remain discerning lenders, notes Rick Shaffner, CEO of Northville, Michigan-based Main Street Bank. "Our growth does come from our lending side, but 85 percent of our lending is secured," says Shaffner. "[Loans] are often secured by commercial real estate holdings or by a second mortgage on a home."
Geography, rather than sector preference, can factor significantly in lending activity, adds Michael M. Moran, chief of capital markets at Capitol Bancorp in Lansing, Michigan. "Lending opportunities tend to be more prominent in areas with demographic growth, such as Arizona and Colo-rado in the Southwest, California on the West Coast, and the Carolinas, Georgia and Florida in the Southeast," Moran says. "We are not fad-oriented, but there's a reality that some markets are more attractive than others at certain times."
Finally, while it may not be any easier to land a loan with a community bank, your answer may come faster. "The decision-makers are right here," says Shaffner. "We can discuss the approval of a loan in the hallway and say yea or nay right there."