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Community Banks: An Asset for Small Business

Want a bank that knows you and understands your business? That won’t tighten your line of credit to protect their balance sheet? That can give you guidance? Then look no further than your community bank. The impetus to move to a community bank becomes even greater with the news that small banks now have more access to TARP capital.

Although most community banks did not get involved in the sub prime mortgage and credit default swap mess, the Treasury clearly sees a growing role for these small banks. This is critical for the health of the primary engine of the US economy and the source of most new jobs: Small Business.

Treasury Secretary Timothy Geithner said the Treasury intends to use the proceeds from Troubled Asset Relief Program repayment to fund the new round of small-bank capital injections.

Banks with total assets under $500 million will have a new chance to apply for government assistance over the next six months. Geitner stated that community banks “will play a critical role in laying the foundation for economic recovery.”


Photo credit: Janine Bentivegna

Tribute, Inc. recently made the switch to a community bank. In this economy, a relationship with a banker who knows what you do – and is interested in your business – is of importance and Tribute was looking for a banker that wanted a personal relationship.

Featured in a Crain’s Cleveland Business article on the increasing popularity of community banks, Tim Reynolds, president and owner of software company Tribute Inc. in Hudson and chairman of the Council of Smaller Enterprises (COSE), said he doubled his line of credit and lowered his interest rate by moving from a larger bank to community lender. But the credit line itself wasn’t his motivation for the switch.

“It was a much more personal relationship with the bank,” said Mr. Reynolds, who noted that he didn’t have a consistent lending officer at his former lender. “Here was a bank that was interested in my business - that wanted to understand my business.”

Krista Dobronos, assistant vice president of commercial lending at CFBank, said she has seen more potential customers who have had their credit tightened at larger banks. Most of those people, though, aren’t necessarily looking for access to more money when they come to her bank.

“They’re just looking for more guidance with their business,” Ms. Dobronos said. “They’re coming based on the relationship, first.”

With the influx of additional TARP capital and their emphasis on forging business relationships, community banks merit serious consideration by the small business owner.

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