The community bank as community college

Providing financial education to your small-business customers can improve the health of their companies—and yours, too.

By William Atkinson

Most community banks make it a priority to lend money to local people starting and building businesses, but new research suggests that, if they really want to help these businesses grow, they should also focus on providing education to entrepreneurs.

According to a Q2 2017 CNBC and SurveyMonkey quarterly Small Business Survey, independent business owners without a four-year college degree now outnumber those with a bachelor’s degree or higher: 56 percent did not graduate from college.

In addition, the 2017 America’s Voice on Small Business report, published by America’s Small Business Development Centers (SBDC) and the Center for Generational Kinetics, states that more than 13 million millennials say the number-one reason that keeps them from starting a business is not knowing how to run one. The report also noted that these millennials also don’t know
where to go for help to start or run a business.

“Many of [our small-business customers] think of us as a trusted advisor in a small circle that might also include their attorney and accountant.”
—Clint Morton, Farmers & Merchants Bank

Several community banks are taking note of the education gap and working hard to fill it. “Business lending is our bread and butter,” says James Beckwith, president and CEO of $971 million-asset Five Star Bank in Sacramento, Calif. To provide business owners with the education and support they need to succeed, the bank helped establish an SBA Small Business Development Center program in Sacramento.

Beckwith personally spearheaded the program as board chair of the Sacramento Metro Chamber, an organization that supports the economic success of local businesses.

As part of this program, the Small Business Development Center has contracted with a counselor to provide education to small-business owners. “Our bank provides this counselor with the office space he needs, so he can maintain office hours and provide consultation services to local businesses,” he says.

In Miamisburg, Ohio, $145 million-asset Farmers & Merchants Bank is also emphasizing education for entrepreneurs. “We are neither attorneys nor accountants, so we do not provide legal or tax advice to our small-business-owner customers,” says Clint Morton, senior vice president and senior lender. However, small-business owners do come to the bank for education and information, primarily as it relates to financial and strategic advice, with the former being focused on topics such as cash flow, loan structure and expense control. “When we see or think of something that might help them, we often share it with them,” Morton says.

“Many of them think of us as a trusted advisor in a small circle that might also include their attorney and accountant.”

Industry VOICE

William Atkinson, a longtime Independent Banker contributor, is an Illinois-based journalist specializing in banking and small-business issues.