Why small business owners love their community banks

“I want someone who not only understands our balance sheet but knows who we are, what we stand for and how we’re different from other businesses in our industry.”
—Mark Beauchamp, Café Yumm (with business partner and wife mary ann)
Photo: Erik Bishoff

Small-business lending is one of community banks’ most important contributions to the economy. But what do your small-business customers have to say about it? We asked some of them why they love community banks—and what they want to see more of.

By Elizabeth Judd

When businessman Mark Beauchamp decided to turn his wife Mary Ann’s passion and flair for cooking into a restaurant, the couple knew that their vision was more expansive than merely serving food to paying customers—and it took years of hard work.

One of the first registered benefit companies in Oregon, Café Yumm, which now has 21 restaurants with two in development, offers everything from trademarked Yumm Bowls to bentos. The company also works hard to embody its stated purpose: “To nourish humanity in the world, not to maximize the return on investment,” Mark says.

As the company grew, the Beauchamps had a few banking relationships, including one with a large bank that got swept up in the mergers and acquisitions craze. “It became the no-service bank experience. It was just absurd,” says Mark. “With this national bank, if we wanted a loan, someone said: ‘Call the 800 number.’”

And so, while he and Mary Ann were not specifically seeking a community bank when they began working with Summit Bank in Eugene, Ore., they wanted a financial institution more closely aligned with their own values as a growing, mission-driven restaurant chain. The relationship worked from the start. “I want someone who not only understands our balance sheet but knows who we are, what we stand for and how we’re different from other businesses in our industry,” Mark says.

Mary Ann agrees: “At Summit, we have a personal relationship with the bank president. This is the first time we’ve had a banker that hugs us at the end of a meeting.”

Independent Banker spoke with the Beauchamps and five other small business owners on opposite coasts who bank with John Marshall Bank in Reston, Va., and Summit Bank.

We found that while the way in which small businesses find the right bank for them has some element of serendipity, common themes emerge. Small businesses are looking to reliably secure loans early in their development, but they also desire flexibility to ensure golden opportunities don’t escape because of a missed deadline.

Above all, they want a more personal—and sometimes even an advisory or mentoring—relationship with their bankers.

The wind in his sails
Larry Goldberg, an Annapolis, Md.-based entrepreneur and owner of Freedom Boat Club and Fairwinds Marina, is proud of his 100 percent CSI (Customer Service Index) rating from such manufacturers as Yamaha and Glastron Boats. He is committed to working with community banks because he wants “the same level of service and knowledge from my vendors and from my banks as I give my customers.”

“[I want] the same level of service and knowledge from my vendors and from my banks as I give my customers.”
—Larry Goldberg, yachting entrepreneur (with daughter joanna)

He also praises community banks for their nimbleness. In August 2013, for instance, when he bought Fairwinds at auction, he had a mere 30 days to settle. “I’d never trust a large bank to do that. They’re not set up to act very quickly,” he says.

John Marshall Bank, however, had the necessary relationships with appraisers to advance the process and coordinate many moving pieces at once. “We needed a partner we could count on,” Goldberg says. “John Marshall cares about their customers, and it comes from the top all the way to the tellers.”

Another community bank difference is their in-depth knowledge of their local economies. Marty Segal, one of the principals and a cofounder of Adams Investment Group, a real-estate development and investment company in the Washington, D.C., metropolitan area, has found “the larger banks don’t always fit the need of local developers.”

“There is less bureaucracy and the approvals get done quicker, which really helps a deal succeed.”
—Marty Segal of Adams Investment Group (r) with cofounder John Holmes

He notes that because D.C. is home to the federal government, the population is transient, so real estate there often is active even when the market is stagnant elsewhere.

“At times a bigger bank may say [it’s] not necessarily going to invest or lend money because real estate generally is depressed,” says Segal. “But a community bank would say: ‘We have a relationship with the borrower, we know this area has activity, we know people are moving in, and we’re willing to lend here.’”

Beyond local knowledge, Segal praises community banks for their responsiveness. He notes that when a deal has had to close quickly, community bankers have met him at a property site the same day. “There is less bureaucracy and the approvals get done quicker, which really helps a deal succeed,” he says.

When a small business takes off, it can sometimes outgrow its community bank roots. That was the case for Café Yumm, which began forging relationships with regional banks as the chain grew and the company began to franchise. Mark Beauchamp recalls that when Café Yumm expanded into Seattle, the committee at a regional bank “decided against funding us at the eleventh hour.” By that time, though, Summit Bank had grown, too. “Summit stepped up when regional banks had committees and hierarchies to go through,” he says. “One bank declined the loan at the last step in the review process, weeks into the application. Another bank never made it to the point of completing the loan process to even make a loan decision.”

He also explains that he and Mary Ann have benefited from Summit’s business acumen. Often, Summit leadership will propose creative financing solutions or even suggest new strategies. “With larger banks,” he says, “we maybe meet once a year. With Summit, we bounce ideas off each other all the time.”

Shiv Krishnan, president of INDUS Corp., a Tetra Tech company, wanted to work with a community bank that possessed specialized knowledge about federal government contracting, as well as a great management team (see sidebar, page 46). “What you don’t want,” he says, “is a community bank that’s small and not well managed. If you depend on them for your financial support, and if the bank is not well managed, that can hurt your business, too.”

Shared wealth—Meena Krishnan of Inoventures works with Dan Hampton (l) and Bill Ridenour (r) of John Marshall Bank.

Shiv Krishnan’s wife, Meena, who is president and CEO of Inoventures, LLC, based in McLean, Va., offers a similar take. “I chose John Marshall because of the excellent service it provides. The people I work with are great professionals.” She praises the bank’s culture, in which access to decision makers is the norm.

“If I have anything I need to discuss,” she says, “I can talk to vice president Dan Hampton, senior VP Bruce Gammill or [president] Bill Ridenour. They’re excited about our business model, and they have always been our cheerleaders. That doesn’t happen all the time.”

Growing together for 20 years

Shiv Krishnan’s INDUS Corporation has worked with two community banks as it has expanded.

Full service—Shiv Krishnan (l), here with John Marshall Bank’s Dan Hampton, says the banking relationship has been key to INDUS Corporation’s success.
Photo: Jeanette Galie Burkle

In 1994, Shiv Krishnan, president of INDUS Corporation, a Tetra Tech company, was seeking a $50,000 loan to grow his Vienna, Va.-based information technology services company. “I went to five regional and national banks, to people that I’d known over the years, who all in their advertisements say they’re friendly to small business. But when I wanted that one small loan, they were not able to come through,” he recalls.

George Mason Bank granted Krishnan the loan. “Imagine the benefit to the community bank,” says Krishnan. “The relationship started with a $50,000 loan that eventually evolved into a $10 million loan portfolio over 10 years.”

Krishnan sees his community banking relationships as central to INDUS’s enormous success. In March 2016, his company was acquired by Tetra Tech, a $2.6 billion public company based in Pasadena, Calif.

In addition to providing vital capital infusions, “community banks become an advisory arm for you to put you in touch with other groups that can help your business grow,” he says. “Banking is all about whether the bankers understand your business and are ready and standing by to help you in times of need.”

When George Mason was acquired by United Bank, Krishnan began working with larger institutions but stayed in touch with George Mason alumnus Bill Ridenour, who later became the backbone of the leadership team at John Marshall Bank in Reston, Va.

Krishnan began working with John Marshall Bank during the financial crisis of 2008 and 2009, when he saw the other larger institutions “running scared” and imposing exclusionary standards even on successful businesses like INDUS.

Krishnan points to the many times that community banks have proven critical to his company. When INDUS bids on a $6 billion, multiple-award government contract, a key RFP question was how the bidder’s bank would provide support should the company need to deliver work worth $100 million in a single year.

“Ridenour jumped in and said that INDUS is a marquee company and that they’d provide that level of support to help INDUS,” he concludes. “John Marshall became one of the reasons why INDUS was selected on that large contract. It’s been a win-win relationship.”

A community bank wish list
Segal acknowledges that there are some trade-offs to working with community banks. He notes, for instance, that community banks tend to shy away from long-term, permanent, nonrecourse financing because they have different risk profiles than larger institutions.

Another way in which community banks lag behind national or regional competitors, Segal says, is in their online capabilities.

“For community banks, the population is centered around where the community is, so it’s not necessary to dedicate as many resources to the online world,” he says.

Mark Beauchamp says that while bigger banks tend to have superior online banking offerings, he’s pleased that “Summit has implemented those technologies as [and when] they can.”

So, while shortcomings within the community banking world do exist, the small businesses we spoke to, at least, see the pluses as far outweighing the negatives.

In the end, what draws Goldberg to community bankers is the personal care he receives. “In the end,” he says, “all business really is personal. And when it becomes not personal, it just doesn’t work as well.”

Mutual trust

The story of Gallic & Johnson Financial and Summit Bank.

Kerrie Johnson

On Christmas Eve a few years ago, Kerrie Johnson, owner and loan originator at Gallic & Johnson Financial in Eugene, Ore., was home when she got a call on her cellphone from Summit Bank about a suspicious ACH transaction.

“Before this woman went home for the holiday, she wanted to make sure there wasn’t an issue,” recalls Johnson.

Johnson, who regularly processes monthly mortgage payments through ACH as part of her private lending business, appreciated the level of concern.

“I feel pretty confident that Summit is closely monitoring ACH and other types of things,” she says. “With a big bank, who knows?”

She continues: “I feel that Summit takes me on as a personal responsibility. If my ACH account gets hacked, it hurts them as well. I feel safer with a community bank.”

Beyond the attention to detail, Johnson appreciates Summit’s willingness to understand her “unusual type of business.” As a private-money lender, also known as a “hard-money lender,” Johnson has found that national and regional banks are often skeptical of a business that’s sometimes gotten a bad rap even though risk levels are not unduly high.

Too often, she says larger banks are hamstrung and will only extend lines of credit if she keeps “ridiculously large sums of money on deposit, which defeats the whole purpose of having a line in the first place.”

Johnson continues: “Our community bank didn’t just hear ‘hard money’ and think, ‘Oh, that’s scary.’ Summit took the time to say: ‘I understand you’re different and this is what you do, and this is why it makes sense for us to give you this unsecured line of credit.’”

Elizabeth Judd is a writer in Maryland.