Banks and Small Business Lending

Banks and Small Business Lending – October 24, 2010

What banks are you referring too when you state that banks are not lending? Interesting question. Since September 30, 2008 to September 30, 2010, Willamette Community Bank’s loan portfolio has grown 41%. Loans for cars, trucks, working capital, equipment, commercial real estate, residential mortgages, home equity loans, service industries, dairy and seed farming operations to name a few. Helping small business owners when big banks refused and doing so without any government TARP money. We continue to support our communities during a period that remains arguably the most problematic economy since the great depression and fully understand that capital is the lifeblood of any business and without small businesses, no community can expect to prosper.

These days, all eyes are on small businesses, and for good reason. They’ve created the majority of new jobs over the last decade and, in the past downturns, it’s been small business growth that has pulled us out of recession. The ability of small businesses to finance growth is, in turn, largely dependent on the capacity of local community banks to lend them money. Community banks account for 54% of small business lending. Big banks, the top “20”, devote only 18% of their commercial loan portfolio’s to small business.

Why does Willamette Community Bank do so much more small business lending than our big competitors? One reason is that big banks rely on computer models to determine whether to make a loan. Because the local market conditions and the circumstances surrounding each borrower and his or her enterprise are so incredibly varied, this standardized approach does not work very well when it comes to understanding the nuances and risk associated with a particular small business given the need for credit cannot solely be allocated based on “hard credit data” inputted into a model. By drawing on qualitative information – getting to know our borrower, learning about the business and our understanding of the local market – we believe we can better access risk and successfully make loans to a wider group of small businesses vs. our larger counterparts.

Community banks have long been the backbone of the US banking system and serve as a driving force behind the growth of rural America. At Willamette Community Bank, we see our success as inextricably linked with the communities we serve, both with businesses and individual customers. We value our local decision making and ability to customize solutions for small businesses. Service like no other is our “organizational culture” where we value people over process.

One thing rings true. Just being a community bank does not guarantee our success. We must remain competitive in price, product and technology. Our challenge is to remember who we are while remaining relevant and competitive.