WASHINGTON. Small Business banking and providing business loans are a big business for America’s major lenders. The total dollar figure of small business loans under 1 million is roughly half a trillion dollars. And according to the US Census Bureau statistics, there are approximately 27 billion Small Businesses in the United States. The largest segments are home-based businesses and sole proprietorship, 52 percent, and 73 percent respectively.
What qualifies as a Small Business
Small businesses are considered for-profit enterprises with less than 500 employees.
Banking for Small Business
For small businesses with employees, bank loans are the third largest source of expansion financing. 10 percent comes from business and personal credit cards.
The quintessential features of a good small business bank are support and flexibility. However you dice it, small businesses want a lender who is not only local and convenient but one that understands their needs and can help them better serve their clients. Especially when it comes to the all too important issue of financing.
Financing is a product of the overall amount of capital or total credit line and the variety and number of repayment options. The danger banks often face lending to small business clients is the unfavorable results of management based decisions. Especially, volume-based decisions as they impact sales, business profitability, and, in the long run, ultimate solvency.
A bank is a whole lot more than just a checking account and a bank statement at the end of the month. It’s the ability to process and meet payroll, purchase equipment, and supplies and collect receivables.
A lot of banks now offer more service features that help small business owners navigate day to day operations. Bill management software, in particular, is a key feature that cuts costs, saves time, and eliminates errors. All of which can mean the difference between turning a profit and closing your doors.
Small Business banking at Wells Fargo
Wells Fargo offers online features that allow small business owners to manage their employees and payroll. The site not only provides the software, it educates owners on the regulatory issues facing all owners. This is beneficial to both the bank and the business owner because a better run business is a profitable business. And a profitable business is a client for the long run.
Education features include general payroll taxing requirements. It gives first-time business owners a brief but vital overview of the payroll tax system. It reminds us why a bank is a partner to the business community and not just a lender. Financing can’t replace knowledge in the long run.
The education does not stop there. Some of the articles that they have listed on the site include how to negotiate with a venture capitalist, bookkeeping and accounting tips, formulating a balance sheet and they even feature videos on making management decisions like what training to invest in.
Small Business banking at Beneficial Bank
Beneficial Bank, another well-known lender, has features geared toward the equipment purchasing side of operations. They offer equipment leasing options for their small business banking clients. Since they usually are the ones taking the risk along with the small business owner, it only makes sense that they make certain that it is not only a smooth seamless transaction but that the asset value is sustainable and assured.
This unique feature puts vendors that provide the necessary industry equipment and small business owners in the market for such equipment together. Making the process seamless and efficient. Ultimately, saving the business owner time saves them money and goes one step further, toward guaranteeing profitability.
Leasing not only reduces a small businesses exposure to risk associated with owning the real property outright. It is also a great way to lower the debt to equity ratio because the company is not responsible for reporting the complete liability for leases under 12 months.
There are also other non-traditional lenders out there that provide Small Business Loans.
Companies that specialize in servicing small business owners specifically. These outfits are usually not brick and mortar establishments, but provide reliable amounts of financing nevertheless.
The major upside to their features is cash flow efficiency. Generally, there are no minimum daily balance requirements associated with their loan covenants, like small business checking accounts from banks and other brick and mortar establishments.
Looking for a suitable lender is tricky. A small business needs to prioritize all of its major borrowing needs. Then shop around to find a lending institution that meets most of those requirements. At the end of the day, choosing to do business with any lender is a two-way business relationship. While borrowers need the cash, the bank also needs the interest payments to stay profitable.