Banks that help to build the local community quickly become its cornerstone.
Community banks offer true value to the local economy when they work closely with small businesses. For many small businesses, community banks are their only source of credit -- credit that’s needed for salaries, equipment, and goods and services that bolster quality of life and local economic health.
Small business loans do present different risks. Small shops don’t always have deeply experienced financial professionals on staff, ideal collateral, or long business histories. And that poses real challenges to accessing the credit they need to grow and succeed.
That's why the U.S. Small Business Administration created tools like loan guarantees for private lenders. Use them as a way to stand out from your competition as the community lender – and the community builder – of choice.
For stronger relationships and more engagement with your local business community, show them you are committed to their success. Help small businesses access the credit they need to:
Establish a presence in your community.
Expand an existing company.
Provide local jobs.
Purchase of goods and services.
When you partner with VITAL, you will access both expertise in SBA loan programs and financing commercial and industrial businesses. Here's 3 tips for building communities with safe and effective small business lending:
1. Leverage loan guarantees. The SBA offers an array of financial programs that mitigate the risks when making loans to businesses that don't normally fit your ideal credit profile. Additionally, there is an active secondary market for the guaranteed portion of the loan, which provides a strong source of noninterest income.
2. Structure loans based on the cash flow of the borrower, not the collateral. Many local businesses – while successful – lack hard collateral. SBA programs allow a lender to make a loan based upon the repayment ability of the borrower, irrespective of the amount and type of collateral they have. The government guarantee “stands in” for the collateral.
3. Extend the term of the loan to enable stronger cash flow and increase the financial stability of the borrower. Cash is king for small businesses. The longer loan terms available through the SBA lower monthly payments and allow the business to build cash, increasing its financial strength.
You can read our case studies for successful small business lending stories.
If you're ready to become the go-to bank, contact me to get started.
Michael Slater, President
VITAL Financial Services