The Benefits and Impacts of Community Banking
Relationship banking is a strategy that adds value to the community in many ways. Let’s go over a few unique roles that community banks play and the impacts these roles have on the community.
Community Banks Support Small Communities
Local banks can play different roles depending on the size of the community. For smaller communities (generally speaking, a population of 15,000 or below), community banks are important contributors to the local economy. They support the economic viability of a town in many cases, and in smaller rural communities, there’s oftentimes an active and vibrant community bank. It’s not uncommon for community bankers to be local emergency responders, on the local development board, or in the chamber of commerce. Community banks often support local kids’ athletic clubs with sponsorships and donate/contribute to local fundraisers. Additionally, local banks encourage development and financial inclusion by encouraging businesses to come to town. They provide financial products and services that might otherwise be unavailable to locals while educating and advising them. Because of this, community banks occupy a key niche in many American communities.
Community Banks Promote Small Business and Entrepreneurship
Loans and other financial services are crucial for startups and small businesses. Without access to these important tools, it’s nearly impossible for small businesses to gain traction and grow. Larger lending institutions oftentimes have strict guidelines and unrealistic underwriting requirements for many small businesses to meet. As a result, an entrepreneur’s local community bank is often the only source of financial services available to them. Incorporating relationships into the underwriting process opens the door for many small businesses to thrive by supporting them in their infant stages with streamlined access to capital. Better yet, due to the community banker’s rich knowledge of the local area and the entrepreneur (knowledge that the banker gained through the relationships they cultivated), they can provide personalized recommendations to an extent unmatched by larger financial institutions.
Community banks also collaborate with the Small Business Administration (SBA) and other governmental organizations. For example, they can match SBA loan criteria to assist business owners in qualifying for funding. Ultimately, community bankers make informed decisions that prioritize local success because the local area is their lifeline. When the community thrives, so do the banks.
Community Banks Prioritize Customer Service
If you’re a customer at a large financial institution and have a question or concern, it’s not an unreasonable expectation to encounter an automated customer service process somewhere along the way. Once you finally reach a customer service representative, chances are they live in a different state or, in some instances, an entirely different country. Scott Swenson, Senior Vice President and Chief Banking Officer with Drake Bank, expands upon this concept:
“The decision-makers are locally based. This means that you can come into the bank, meet the decision-makers, and talk strategically about solutions and options.”
Community bankers will take the time to get to know their customers and will make decisions for the people behind the business. They aren’t restricted by nationwide operating procedures or black box algorithms built to provide cookie-cutter solutions. This is an important feature of community banking that keeps them competitive. Your community banker will work with your CPA, attorney, and even your family to develop a holistic strategy that works for you. This is an unorthodox approach to banking but a very effective one.