Privately held businesses in the U.S. rely on a number of partners to help them run smoothly. Small companies tend to outsource many non-core functions, from basic marketing to delivery and more, because they often lack the capital that affords them the opportunity to develop these functions internally.
As businesses grow, decisions are made as to whether efficiencies can be found in bringing these functions in-house. Accounting, considered a core function by most, can also be outsourced. Larger companies can generally find value in bringing this function in-house by hiring a controller or chief financial officer (CFO). These roles comprise a very important part of the senior management teams of larger, privately held companies. Unfortunately, the owners of smaller companies do not often have access to the capital that could allow them to hire these people. Instead, small businesses rely on their outside accountants and bankers to give them financial advice.
But small companies rely on their banking relationship for more than just capital. Many times they depend on their bank and banker to provide advice on everything from whether to buy a new piece of equipment, to what accounting firm they would recommend, to where they should obtain insurance. Understanding the unique needs of their customers helps banks offer solutions that are targeted to the individual customer.
Community banks usually make their decisions locally, within the same community as their customers, and this is vitally important to both the banks and their customers. The boards of community banks are many times made up of local small business owners who share the same risks and rewards as those who seek the banks’ assistance. These critical individuals often help guide bankers in developing relationships with their customers.
Community banks strive to get to know their business customers well, and depend on them to refer neighbors and friends back to the bank. Community banks, unlike their larger counterparts, have fewer resources devoted to marketing, and focus more on developing personal relationships with their customers.
Financial institutions of all sizes are an important component in the capital structure of businesses large and small. Community banks are important to small businesses in a similar way as how money center banks are important to public companies. The old saying of “one-size-fits-all” doesn’t ring true when talking about banks and small businesses. iBi