Erik Huberman is founder and CEO of Hawke Media, a full-service outsourced CMO and marketing consultancy, and author of The Hawke Method.
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With its vast resources and flashy marketing, a large bank can seem compelling for your business’s needs. A large bank, however, may not understand, or even care to understand, the nuances of your business.
As the founder and CEO of Hawke Media, I learned the importance of using a community bank in 2020.
When My Brand Needed Support
Hawke Media was relatively lucky at the onset of the Covid-19 pandemic. Many of our clients, however, were hit hard, which impacted our bottom line.
We were banking with a large national institution at the time, one whose name you would recognize. The bank didn’t necessarily do anything wrong, but at the end of the day, when we had jobs to save, they didn’t have time to help us apply for the Paycheck Protection Program (PPP) when we needed it most.
We found a bank based in the same region that Hawke Media was based, and they were able to help us with a PPP loan application right away. In fact, 60% of small and medium-sized businesses that got PPP loans in 2020 were from community banks.
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Across the board, community banks can empathize and accommodate brands in a way the big banks cannot.
A Human Experience For Entrepreneurs
Community banks thrive on local entrepreneurs and privately held businesses. A smaller bank often has more personalized services and closer locations. It can also be easier for entrepreneurs to get loans at smaller institutions.
Smaller banks use nonfinancial data to make underwriting decisions because they’re able to look at applicants in the eye. The regional bank talked to me about the business model, got stats from before the pandemic, and discussed our plans for the new, uncertain future. Big banks can’t get that intimate. Their systems only allow them to crunch existing data and spit out a result.
Factors like this are why regional and community banks score four points higher than national banks in the American Consumer Satisfaction Index.
After the great experience I had, I realized it was also time to change where I banked as an individual. Being treated like a human, and not just a number, made a world of difference. It suddenly felt ridiculous that my personal money was entrusted to faceless bankers I’d never meet.
Even if you’re not looking out for a whole business, local banking comes with a level of trust and respect that you can’t afford to skip.
Better Rates
If you’ve read this far, you’re likely wondering about rates. No one wants to spend extra money. Not only can smaller banks often offer better rates—both for businesses and for individuals—but they offer them in a language both you and I could understand. Fees and interest rates are straightforward. I didn’t feel like I needed a finance degree to understand the paperwork I signed.
On top of that, fees can be lower at smaller institutions. According to research by the Consumer Financial Protection Bureau, overdraft and non-sufficient funds fees can be anywhere from 13% to 19% lower at small banks and credit unions than at large banks.
Community Involvement
Local and regional banks are integral parts of the community they are located in. They’re your friends, and neighbors, and welcome many businesses in your city or state.
Community banks wouldn’t exist outside the entrepreneurs and business owners within their communities. According to a study of lending by the Small Business Administration in 2019, the satisfaction rates for entrepreneurs and small-business owners with banks were as follows:
- 79% for community banks.
- 67% for large banks.
- 49% for online lenders.
It makes sense: Community lenders are more likely to care if their customers are satisfied.
Flexible Services And Process
While bigger banks may have more robust offerings, you can find more flexibility in a smaller bank. Especially in the unprecedented times early-pandemic, we needed an institution that could roll with the punches.
Ethics And Stability
Regional banks need trust to continue to operate. Better business begins with banking institutions that have a vested interest in their clients and have a relationship built on trust.
When a large institution, especially a publicly owned one, takes a large financial hit, the top priority is to balance the books. Historically, this has meant shutting down branches or laying off employees until they can say they will “break even.” If you’re at a large institution for stability, there’s still a reasonable risk that the branch you work with could unceremoniously be wiped from the board.
What Works For Your Business?
At the end of the day, there will always be pros and cons to any business decision. Many people find the right balance with the Goldilocks approach—something not too large and not too small.
No matter what, though, the bank you use could easily end up determining a lot of your biggest business decisions. If you’re like us, you’ll find a welcoming home in a community bank.
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Author: Erik Huberman, Forbes Councils Member
