#348. Where Do You Bank?

Posted on | The Agurban

Where Do You Bank?

Last week we talked about the local income effect of Local Ownership in regards to firm size and resident/non-resident ownership. This week, we want to share information on the benefit of smaller local banks.

A study by the Office of Advocacy of the Small Business Administration looked at small business lending in the context of an economy that has endured a deep recession and appears poised for recovery. One portion of the study looked at the total business loan ratio, which in effect, measures the success of small businesses in competing with larger businesses for loans. The study showed in 2010 the smallest banks (those with deposits less than $100 million) devoted 87% of their total business loan portfolio to small business loans (loans under $1 million), compared to 26% for the largest lenders (those with deposits greater than $10 billion).

Where you bank does have a direct impact on the investment of dollars into your local community. Your deposits in your local community bank are turned into loans for personal, business, and agricultural purposes to help the community prosper. The more the community prospers, the more the local bank benefits and is able to reinvest.

Keep in mind these facts about small businesses:

– Small businesses employ over half of all private sector employees;
– Small businesses pay 44 percent of total U.S. private payroll;
– Small businesses create more than half of the nonfarm private gross domestic product (GDP)
– Small businesses generated 64 percent of net new jobs over the past 15 years.

Local does matter!

Source: Prairie Business Magazine; Lending by Depository Lenders to Small Businesses, 2003 to 2010 by Office of Advocacy of the SBA.