How to find a small business-friendly bank
Using FDIC data, one online tool grades banks on their commitments to small business lending.
A money changer shows some one-hundred US dollar bills at an exchange booth in Tokyo in this 2010 file photo. According to Cornwall, finding a friendly bank is crucial for small businesses, and there are online resources to help with the search.
Issei Kato/Reuters/File
“There is a bank on every corner. If you don’t like the answer you get from one, go to the one across the street.”
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Jeff is the Jack C. Massey Chair in Entrepreneurship and Director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn.
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That is the advice my late father gave me a long time ago about finding a small business friendly bank.
Now there is a new tool to help make this process easier for small business owners.
“One of the biggest challenges that small businesses face is access to capital,” says Ami Kassar, CEO of MultiFunding, a small business financial advisory firm. “We decided to give small businesses a gift this year and help them find local banks that are friends of small business – Banking Grades.”
Banking Grades is a proprietary online tool that grades every bank on its commitment to small business lending. Using public data from the Federal Deposit Insurance Corporation (FDIC), Banking Grades compares the amount of a bank’s deposits to the amount of loans that bank has made to small businesses. These loans are $1,000,000 or less. “Based on our experience of helping small businesses find financing, we believe that a one million dollar loan is a good barometer of small business lending,” explains Kassar.
On Banking Grades, anyone can search for an FDIC-regulated bank by name, zip code, city and/or address. Banks that make the most loans to small businesses (proportionately to their deposits) receive an A. Conversely, the banks are not making small business loans, receive an F. There are thousands of banks in between. “It is our hope that small business owners will use this tool to find local banks that will lend to them. All banks have money, but the biggest one or the closest one to your store isn’t necessarily the one focused the needs of small businesses,” says Kassar.
Banking Grades gives an A grade to 2,693 banks in America. In order to receive an A grade, a bank needs to utilize 25 percent or more of its domestic deposits to make small business loans.
I tried it for my location. It was easy to use and, quite frankly, eye opening. I found out I was doing business with two banks that did not get very good grades!
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