Community banks have edge in small business loans

Monday, February 04, 2008

When Murfreesboro-based Reeves-Sain Pharmacy decided to refinance its bank loan last year, owners Rick Sain and Shane Reeves looked at eight different banks.

“Obviously, we were looking for the best deal,” Sain said.

And to their surprise they found what they were looking for at Rutherford County-based MidSouth Bank.

“We thought they are local, the money would be staying local, and decisions would be made local,” Sain said. “If I need something, I can call Lee Moss, the president of the bank, and I can’t do that with any other bank.”

Community banks often have the edge in securing small-business clients because of the personal attention they can provide and the knowledge they have of their market; many have bankers who have worked in the same market for more than 30 years. These types of banks offer a full range of services and are able to make decisions locally, based on the individual, rather than strictly relying on financial statements and business plan.

Some larger community banks have millions of dollars they can lend to any particular business.

Community banks are in a better position to assume the risk of granting loans to small businesses owners that regional and national aren’t. They can spend time with the existing or prospective business owner and serve as a financial advisor.

“For small business, it is huge,” said Tom Swett, owner of the fast-growing Ameri Care Services, a Murfreesboro-based pest control company. “When a company is growing by more than 20 percent, you need capital.

“A local bank took a chance on me more than 20 years ago,” he added, because the bankers knew him and his parents.

Three community banks with a strong presence in Rutherford County were listed as some of the top small-business lenders among Nashville area-based banks, according to a list compiled by the Nashville Business Journal based on statistics from the Federal Deposit Insurance Corp.

Pinnacle Financial Bank, which acquired Murfreesboro-based Cavalry Banking in March 2006, held the top spot, lending $489 million to 2,953 clients. Wilson Bank & Trust, which entered the Rutherford County market four years ago, held the No. 3 spot, lending $150 million to 1,395 customers. MidSouth Bank, founded in 2004, held the No. 11 position, lending $42.6 million to 289 customers.

Small-business lending accounts for 29.7 percent of Nashville-based Pinnacle’s commercial lending and leases; 16.2 percent of Lebanon-based Wilson Bank & Trust’s; and 24.3 percent of MidSouth’s.

“We are fortunate to be in a local market that is strong,” said Bill Jones, area president for Pinnacle Financial in Rutherford County, regarding the number of small business loans. “The Middle Tennessee area is home to just a large number of businesses and that business seems to be good. I do think we are fortunate in that the Middle Tennessee area is stronger than most.”

Pinnacle works to hire knowledgeable, local bankers that bring clients with them, he said.

“Most people want a strong relationship with their banker and their financial advisor,” Jones said. “I think that plays into the hands of small business.”

MidSouth specializes in providing personalized one-on-one service with clients, Moss said.

Bankers get to know their clients' ambitions, drive and knowledge of their business.

“We can find a way to make loans work faster — in just a few days,” Moss said.

Wilson Bank & Trust, which is currently expanding its lending staff in Rutherford County, is known for hosting community events and seminars to educate small businesses owners in an attempt to get its name out into the community.

“We work closer with small businesses,” said Randall Clemons, chairman and chief executive officer of Wilson Bank & Trust. “A small business person has a lot of needs, they are not able to specialize and have a CPA or a financial advisor. This is where their banker comes into play here to advise them and to help them have the capital they need to get their business off the ground and stay in business.”