By Karen Axelton
While many entrepreneurs start their search for funding at the bank where they currently bank, the bank across the street from their business or the one that has the biggest name, a new study by MultiFunding suggests that if that bank is a major one, you could be making the wrong choice.
Why? Well, MultiFunding’s research showed that as banks get bigger and more bureaucratic, their small business loan balances decrease.
According to MultiFunding’s data, there are about 93,000 bank branches nationwide. Of these:
- 51 percent are owned by 62 national banks with branches in six or more states.
- 14 percent are owned by 437 regional banks with branches in two to five states.
- 35 percent are owned by 6,280 state banks witih branches in just one state.
Now here are some numbers that might surprise you:
- The average branch of a large national bank manages $4.6 million in small business loans.
- The average branch of a regional bank manages $6.8 million in small business loans.
- The average branch of a state bank manages $9.1 million in small business loans.
In other words, the bigger the bank, the fewer small business loans it is making. Overall, large national banks use 4.41 percent of their domestic deposits to make small business loans. Regional banks use 10.98 percent, and state banks use 14.46 percent.
Multifunding’s conclusion? “Local, community-oriented banks are best equipped to meet the needs of small business owners.”
Of course, it can make a lot of sense to start your search for financing at the bank where you already have your business accounts. But don’t assume that is your best choice. Investigate all your options, and give local and community banks in your area a fair chance. Talk to other business owners in your community and industry to find out where they are getting their loans and what kind of luck they have had with banks in your area.
By choosing the right bank to approach in the first place, you can save yourself time, headaches and the heartache of having your loan application turned down.
Image by Flickr user shinealight (Creative Commons)Google+