Community Banks are Key to Financing Small Businesses in Today's Economy

With all the talk about small businesses being unable to borrow to finance growth during the current financial turmoil, lenders and borrowers in some quarters say that money is available. That is particularly true for borrowing from community banks, according to an article in today's New York Times, titled "Getting the Loan Officer on Your Side: Small Banks Will Lend if They Understand the Business."

"Many bankers claim that their small-business loan volume is up significantly," the Times said. The Federal Reserve's April survey of lending practices showed that credit conditions have improved somewhat. The Small Business Administration (SBA) says that the weekly volume of loans to small businesses is up more than 25% since March.

Most of the lending is being done by small community banks, the Times said. A May survey of 1,500 small businesses by Barlow Research Associates found that companies that applied to small banks for loans in the past year were three times as likely to obtain credit as those who applied to large banks.

Through comments from both borrowers and community bankers, the Times indicates that money is available to creditworthy borrowers who can communicate their needs articulately to the banker, have a good plan in place for moving forward, have good financials and/or a good previous track record, and can develop a good relationship with their banker.

The Times also pointed out that community banks have been cautious, and that many applicants may not be creditworthy at this time.