Interested in working with a community bank? Small-business finance expert Susan Schreter, founder of TakeCommand.org, a Seattle-based small-business funding and finance information website, offers a few tips for finding the right one.
Look for endorsement. "I give extra points to a bank if it's an SBA-backed lender. They often have a small-business focus, and that can have an impact on the approval process," Schreter says.
Watch out for the watch list. The Federal Deposit Insurance Corporation (FDIC), which insures bank deposits, maintains a troubled bank watch list. While the FDIC isn't telling who's on that list, services like Bankrate.com's Safe and Sound Star Ratings can give you insight into the financial health of the bank.
Monitor the management. A stable management team and a recent history of strong equity financing are good signs that the bank is thriving and in a position to be more aggressive in offering competitive terms to small businesses.
Seek out the sweet spots. Many community banks have industries in which they specialize, with a cluster of clients in that sector. Choose a bank that understands your business, both for the counsel and the potential networking and business opportunities, she says.
Schreter also says that your strongest position to negotiate the best terms for loans and other services is when you're a prospective customer and the bank is courting your business.
"Spend time preparing your loan package and financial statements," she says. "Work on improving your cash flow and payment timing. Too many small-business owners don't spend the time making sure they present themselves well to the bank. That can make a big difference in what you're able to negotiate."