It is no mystery that banks are in business to make a profit. With that said, it is important to recognize that banks have a certain level of responsibility to the public because of how they utilize government resources to fund their operations. Although the individual consumer is important in the overall banking community and should be provided a certain level of financial resources, banks should have an even greater cause to support small businesses for the impact they have on life in this country.
It has been analyzed and discussed countless times and it is fair to say that small businesses play an integral role in the economy of this nation. Small businesses are one of the largest contributors to the available jobs in this country and they can have a positive impact on the overall economy when all of their financial data is trending upwards. Yet banks continue to place the bottom line of their own business before these individual business owners; an effort that will only drive business owners to lending resources outside of the traditional financing sector and into the private one.
A government watchdog has recently uncovered some data demonstrating local banks’ selfish attempts to deprive the small business owner access to funding. The report, “Banks that Used the Small Business Lending Fund to Exit TARP”, discusses how community banks utilized money from the Small Business Lending Fund or SBLF to pay off their debt to the government resulting from the financial crisis. Loans given to banks from the taxpayer’s relief bailout, taxpayers that included small business owners.
What is even more ironic is that the SBLF was created in response to the lack of investment into small businesses from banks. In 2010 Congress designated thirty billion dollars in funding to the SBLF, and this money was to be given to local banks to help stimulate lending in the small business community. However, the report suggests that the money assisted one hundred thirty seven banks in exiting the TARP financial bailout program in 2011.
This has been part of the reason that small business owners have had trouble acquiring a business loan at their local bank. With nowhere else to turn a lot of these business owners began applying and receiving a business loan in the private sector. Many private lenders have been willing to step up to the plate and give business owners the funding they deserve. This has resulted in trust and relationship building with many local businesses. Also, as demand has increased in the private sector, competition has been trending upwards and private lending rates have been becoming competitive. This has made it more attractive for borrowing newcomers and has helped fuel additional growth in the private business loan market.
The more banks continue to alienate their customers with tactics like this the less likely they are to receive borrowing customers, and this will ultimately hurt their bottom line. Private lenders have been answering the demand and in the process they are becoming the new go-to resource for borrowing. As this industry grows the entire business loan application process will get streamlined, relationships will be cemented, and banks will be relegated to take a much smaller role in small business lending.