Before You Apply For that Small Business Loan, Read This
Capital is the lifeblood of all business. Whether for start-up, expansion or operational purposes, virtually all businesses will find themselves in need of more at some point. While many small business owners may debate whether traditional financing (from banks) is available these days, community banks have shown they are more likely to engage in small business lending. That said, how can small business owners best position themselves to be able to get the capital that they need?
BLACK ENTERPRISE spoke with Terry Jorde, Senior Executive Vice President and Chief of Staff for the Independent Community Bankers of America. Based in Washington, DC, the ICBA is an organization that represents nearly 7,000 member community banks.
Here’s what she said:
BE: There is this perception among a lot of small business owners, be it deserved or not, that traditional financing is off the table right now. Are banks lending and if they are how can an entrepreneur best position themselves to be able to get the capital that they need?
Terry Jorde: Community banks are lending. They never stopped lending through the financial crisis. The assets of community banks only make up about 20% of all of the assets in the country of the banking system, but they make 60% of all of the small business loans. That’s because of the relationship model that a community bank has versus a Wall Street bank. Wall Street banks are much more focused on transactions and volume and making a profit off of trading and that type of thing. They have a symbiotic relationship with that community, so if they don’t lend into the community, and especially to their small businesses to help them start up and grow, then the community bank doesn’t survive either, because by and large most of their stockholders, most of their employees, live right in that local community.
What’s the main reason why entrepreneurs are denied?
Jorde: I don’t know that I would say that there’s a main reason. One might be that the entrepreneur hasn’t really thought through what their goals are. It’s one thing to just have a dream and say, “I want to do this. That looks easy.” As you know, it’s hard to run a small business. There’s risk in it. The bank is taking risk and the entrepreneur is taking risk. It does take some thoughtful analysis as to what is entailed. You don’t just do it overnight.
Source: Black Enterprise | Alan Hughes