Make the switch without the stress - local banking for local business

This article written by Local First Arizona founder and director, Kimber Lanning. LOCAL FIRST

I was lucky enough to be raised by a family that owned a small business, so even at a very young age, I knew the family banker. When I was 19 years old and starting my first business, I went down to the family banker and he gave me a small loan to get started. I didn’t realize until many years later how rare this was, or how impossible it would prove to be just 10 years later. In fact, that community bank was Valley National Bank, an Arizona bank run by local bankers until it sold to Bank One, which then later sold to JP Morgan Chase. That is how my little store, and my deposits, came to be associated with Chase.

In 2002, when I started Local First Arizona, I learned to take a much broader view of how our economy was working, or not, for Arizonans. And in the process of meeting with businesses across the state, I realized they shared one common difficulty: accessing capital.

In order to stimulate our economy, we need ample access to small business loans from bankers and local credit unions who care about the long-term health of the business and community. Our community banks are more likely to fund the small businesses that are the engine of our economy. The more these banks have in deposits, the more they can lend back into our communities. Small businesses are the backbone of our economy, and they need to have access to capital in order to sustain themselves. When their access to capital is limited or even stifled, they are unable to grow their companies, hire more people or increase their spending. This limitation doesn’t just impact businesses; it impacts everyone in the community in the form of lost opportunities, smaller tax revenues and fewer jobs.

Screen Shot 2015-08-16 at 2.14.24 PMDuring this last downturn, it became painfully clear that Arizona’s businesses suffered greatly due to their lack of access to capital. Loans were called, applications denied, and local capital all but frozen. Arizonans have deposited 96 percent of their money into out-of-state banks. Of that money, about 75 percent ($65.5 billion) is in three big banks that have no local decision-making regarding lending. Recent national reports show that big banks are back up to 17 percent loan approval for small businesses from a low point of just 13 percent in 2012. There are many reasons that number is so low, not the least of which is that big banks don’t offer local decision-making. All loan decisions at these big banks are made in the bank’s home state by people who may not necessarily understand our local market or have personal relationships with the local business owners here in Arizona.

In 2005 I went about moving all of my money to a community bank, First National Bank of Arizona, which was then purchased by Mutual of Omaha. I moved my money to Sonoran Bank, which was then purchased by Kansas State Bank. Finally, I moved to Pinnacle Bank and have stayed put ever since.

Pinnacle Bank, along with Gateway Bank, have been named in the top ten community banks in all surrounding southwestern states in terms of capital, asset quality, earnings, liquidity and growth. And they love lending to locally owned businesses! In fact, it’s what they do best. Pinnacle is second in the state (after Wells Fargo) for SBA lending overall, which is an amazing accomplishment for a community bank.

I believe many small businesses find moving to a community bank to be a daunting task. From someone who has done it many times, I will tell you it just isn’t that bad. And you don’t have to do it all at once!

First, you need a new account, with at least half of your cash assets, and checks. I recommend for retailers or those working with heavy credit card deposits, that you leave these with the ‘old account’ until you are sure everything with the new account is working well. Best to plan to keep two check books for one month, which is not fun for the bookkeeper, but it’s a small price to pay for the glory of being with a bank that actually knows who you are and cares about your business. Focus on payroll next and leave the smaller items like autopay for last. Leave that old account open for at least 3 months to be sure old checks clear and you can settle it up and close it.

Be sure to research remote deposit and online banking opportunities to be sure their technology is a good match for your company. Write a list of all that you currently need and make an appointment with a community bank or credit union to find out where you belong.

credit unionCredit unions and community banks also have outstanding customer service. Just recently, I was on the east coast and had my assistant sign a check for me in an emergency situation. They called me on my cell phone to tell me they were not convinced that the check actually had my signature on it. All on the same day. That kind of partnership helps me sleep at night!

I can’t underscore the importance of community banks and credit unions enough. Credit Unions are fantastic at local lending and small business support. Local First Arizona has outstanding relationships with committed and invested credit unions and, along with 13 Arizona community banks, we are building a stronger Arizona economy.