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Local Favor

The trend in SMB banking is all about staying close to home.

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This story appears in the June 2006 issue of Entrepreneur. Subscribe »

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."

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