The Truth Behind Small Businesses & Big Bank Loans

Small business and finance are topics that go hand-in-hand. Today, a small business owner has a plethora of resources available to them – from banks to friends and family to even the latest trend of crowdfunding. While all are excellent choices for financing, what I’d like to focus on here is the relationship between small businesses and big banks.

The fact that small businesses rely on big banks is a given. However, did you know that big banks rely equally on small businesses? A little known fact remains that small businesses provide a significant portion of the loans they make. It may not seem like it to the “outsider,” but small businesses needs big banks and big banks need small business.

Since I have done a fair share of work with large financial institutions and know they are committed to small business, I thought it would be a good idea to interview a banker and get their input as to the state of small business and small business lending today. I recently sat down with Robb Hilson, Small Business executive with Bank of America (a company I do some work with) to talk small business and big banks.

Q: Let’s start with the state of small business today. Of course the economy and jobs are on everyone’s mind. How are things from your perspective?

A: We recently conducted an in-depth survey on this very subject (The Small Business Owners Report) and the results were very encouraging. The survey looked at the responses of 1,000 small business owners with revenues between $100,000 and $5 million, and who had between 2 and 99 employees.

The survey found that 61% of these small business owners expected their business to grow in the next year. So small business owners are seeing increased demand for their services and I can also report that we at the bank are seeing increased demand for more credit. In addition, loan approval rates are up, and our lending to small business is up 21% over this time last year, so that is a very good sign.
 

Q: One thing that seems to frustrate a lot of people is that access to credit seems more limited today. Is that accurate?

A: What we found in the survey is that 78% of those who applied for a loan within the last two years were approved. As I said, approvals are up. And maybe as opposed to popular perception, you do not have to be a big small business to get a loan. Let me give you an example. More than half of our small business loans go to businesses that make less than $250,000 a year. So the credit is definitely there.
 

Q: What can a small business owner do then to increase their chances of getting a “yes” on their loan?

A: Not surprisingly, the small business must be able to demonstrate the ability to repay the loan. We look at all sorts of things when making this determination, but I would suggest that what is key is your cash flow, strategy, leadership, management, and resources. Additionally, a good business plan is of course essential, as is your ability to articulate your vision in that plan. So good communication between you and the banker is important. We are committed to that.
 

Q: You mentioned the small business survey that you recently conducted. Was there anything in there that you found surprising?

A: I thought this was a very interesting statistic: Small business owners found running their business to be three times more stressful than raising children.
 

Q: There has been a lot said and written about big banks in the past few years. What do you think people should know about banks that maybe they don’t?

A: We try and make every good loan that we can. But note that I said “good loan.” We are committed to lending responsibly. Look, making loans is our job, and doing so help everyone – we get more business, small businesses get the money they need, jobs are created, and it helps the communities we all live and work in. We like to make loans.
 

How do you feel about the points raised in this article? We’d love to hear your input! Share your thoughts below in the comments section.