The Best Banks for Small Business Loans
A small business loan can make all the difference in whether or not your business succeeds.
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- 1 The Average Interest Rate for Small Business Loans
- 2 How to Apply for Government Small Business Loans
- 3 How to Get a Business Loan From Banks
- 4 What Is Needed for a Small Business Loan?
Successfully obtaining a small business loan can make all the difference in whether or not your business succeeds. Some banks are a lot friendlier toward small businesses than others, making it easier to apply for and obtain a small business loan. Although finding such a bank is no guarantee that your loan application will get approved, knowing which banks are more amenable to small businesses is half the battle.
Banking Grades is a new tool from Multifunding, a Philadelphia-based small business financial consultant. By analyzing data from quarterly FDIC call reports, Banking Grades assigns a letter grade from A to F to a bank based on its small business lending performance. To get an A, a bank must apply at least 25 percent of its total domestic deposits to small business financing. Banks that receive a grade of F use less than 3 percent toward this goal. Entrepreneurs seeking small business loans can use this tool to search for small-business-friendly banks in their area, or to check the grade on a specific bank.
Big banks are banks with deposits of more than $10 billion. These include some of the more widely known banks nationwide. Big banks tend to score lower overall in Banking Grades reports. According to Multifunding CEO Ami Kassar, as quoted in the Huffington Post, big banks are too bureaucratic and spread out to handle small business loans well. However, several big banks did score a B or higher.
Top Five Big Banks
As of May 2012, the top-scoring big banks for small business loans included Zions First National Bank, headquartered in Salt Lake City; First-Citizens Bank Trust Company in Raleigh, NC; Synovus Bank in Columbus, GA; Chase Bank Usa in Newark, DE; and Bancorpsouth Bank in Tupelo, MS. With the exception of Zions First National Bank, which received an A, all of these banks received a B from Banking Grades.
Small banks, or community banks, typically serve a region, state or smaller community rather than offering nationwide service, and have less than $1 billion in assets. Smaller banks tend to score better overall in Banking Grades reports, with many small banks receiving an A grade. Community banks typically loan out about 66 percent of their assets in small business loans, a much higher percentage than big banks.
Top Five Small Banks
As of May 2012, the top scoring small banks, all of which received an A from Banking Grades, include Farmers State Bank in Hosmer, SD; Community Bank in Nevada, IA; Farmers And Merchants Bank in Milligan, NB; First Resource Bank in Savage, MN; and Wright Express Financial Services Corporation in Midvale, UT.
The Small Business Administration sets guidelines for loans intended for small business owners who don’t have access to other forms of financing. These loans include the 7(a), for businesses with region or industry-specific needs, and the 504, which is intended for expansion and modernization of a business. Although the SBA does not itself give out loans, it has lending partners, typically community banks.
Top Five Banks for SBA Loans
As of May 2012, according to research done by the financial advice website Nerd Wallet, the top five community banks for obtaining SBA loans include BankFive, headquartered in Fall River, MA; Community West Bank in Goleta, CA; Kitsap Bank in Port Orchard, WA; TwoRiver Community Bank in Middletown, NJ; and Cornerstone Community Bank in Grafton, WI.