Small Business Financing Is Available, Just Not Where You're Looking

Ty Kiisel, Contributor via Forbes.com

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Last week I read an interesting piece Charles Green published on the Coleman Report referencing Pepperdine University’s quarterly Private Capital Access Index for the second quarter of 2013.
The report suggests and Green points out that where many small business owners are looking for capital isn’t where they’re finding it. This is very consistent with what we observe at Lendio. Although where small businesses are looking for financing isn’t much of a surprise, where they’re finding the money they need might be.
Where are they looking?

1. 59 percent are looking at the bank
2. 57.2 percent turn to business credit cards
3. 49.9 percent access their personal credit cards
4. 48.4 percent sought out a personal loan
5. 44.2 percent went to friends and family

It shouldn’t be a surprise that most small business owners still feel like the local bank is the first stop they should make when looking for a loan. In fact, 63 percent of the survey respondents answered the most likely source of financing would be the bank. However it doesn’t take too many rejections before they turn to other sources like their credit cards or a personal loan—or simply stop looking for financing all together.
You might be interested to know that the successes survey respondents were having fell out in the opposite order when compared to where they were looking:

1. 71 percent found success with friends and family
2. 58 percent used their personal credit cards
3. 57 percent used trade credit
4. 54 percent used business credit cards
5. 27 percent found success at the bank

With a few exceptions, of which Holladay Bank & Trust is a great example, far too many banks (in my opinion) are moving upstream to bigger businesses and hopefully bigger profits, leaving the small businesses you and I identify with out in the cold. Unfortunately, most small business owners, 63 percent, pin their hopes on a system that is leaving them behind.

I don’t want to see small business lending fall into the same spiral that hit the Savings & Loan industry a few years back. Nevertheless, I don’t believe the needs of most Main Street businesses are met by equity funding or the same machine that funds big business—or even the bigger small businesses funded with the Small Business Administration’s (SBA) 7(a) loan program. I do believe the biggest job creator in the country (small Main Street businesses) deserve more than lip service from the financial industry and maybe even the SBA.

I’m a big fan of making more capital available to Main Street. And, in some instances, a dismal 27 percent of the time, business owners are able to find the funding they need from the local bank. The rest of the time, business owners are either turning to alternative funding sources or have abandoned their search for financing all together. I think the Pepperdine report brings into focus the disparity between many small business owners’ expectations, the banking industry’s claims, and the reality of small business lending.
Granted, alternative financing is more expensive than a traditional loan at the bank. Even though those costs are coming down, non-bank financing still comes at a premium. However many small business owners, when given the choice, will choose expensive financing to no financing. I certainly would have when I was in their shoes. They just need to know it’s available.

READ MORE: http://www.forbes.com/sites/tykiisel/2013/09/24/small-business-financing-is-available-just-not-where-youre-looking/

Give The Banker A Reason To Ask For More

Ty Kiisel, Contributor - via Forbes.com

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Sir Francis Bacon said, “Knowledge is power.”

Of course the knowledge you posses is what powers your business and helps you successfully compete in the marketplace, but the knowledge you share with your banker has the potential to help you build a strong relationship and a great partnership.

Community bankers like to talk about how the relationships they make with the small business owners in the community is what sets them apart from the big regional and national banks in their area. They use the same argument regarding online lenders. My BS-O-Meter goes crazy every time I hear them pull that out as an argument because local bankers at large national banks are interested in building relationships, and just because it’s online doesn’t mean it’s not a real relationship either.

In fact, a few years back, some partners and I had a great relationship with our banker. He happened to be part of large national bank, but we couldn’t have asked for more personal attention than he gave us. I don’t think we ever met him at his office; all of our meetings took place at our place of business. In fact, I don’t think I was ever in his office.

I don’t know how it happened, but he wound up doing business with a number of our customers over the years so when we needed a banker, it just made sense to work with someone who knew the industry. He often stopped by just to say hello and see how we were doing. We came to trust him and shared where we were seeing success and where we were facing challenges. Over the years he became a valuable partner. I have since come to appreciate how rare that can be, and since that time, I don’t underestimate the value of that type of relationship.

Last week I wrote about what one bank, Holladay Bank & Trust, was doing to help the small business owners in their community. I’m a big believer in the value of community bankers that do more than talk about how they build relationships—they actually do stuff to build relationships. But a healthy relationship with your banker isn’t the sole responsibility of him or her. Like any relationship, both parties have to contribute. If you have a bad relationship with your banker you need to take some responsibility for it.

 READ MORE: http://www.forbes.com/sites/tykiisel/2013/09/17/give-them-reasons-to-ask-for-more/