It often takes a long road to go from a good idea to a thriving company, and the Colorado Bankers Association wants to fill the role of a service station attendant who offers good directions.
The association launched www.SmallBizLending.org, a website designed to help small businesses - particularly startups - navigate through the financing process. The site is part study guide for borrowers and part campaign showing that banks want to lend.
"Small business, as we know, is the key to the recovery, and banks have been lending, even if it has not been perceived that way," says Don Childears, the association's president and chief executive. "So we decided to create a site that has a variety of educational resources that borrowers can think through before they ever talk to any lender. It walks them through the steps of obtaining credit. We don't want them to take no for an answer; we want them to keep learning until they get it right."
The site is educational, but it also provides important marketing support, industry observers say. Small-business lending is a cornerstone of community banking, but the stakes have risen. Qualified borrowers are often hard to come by, and limited opportunities to lend elsewhere are putting even more pressure on bankers to rely on small businesses to add loans.
"So many community banks thrived off commercial real estate and didn't always do a good job of cross-selling their existing small business customers," says Anita Gentle Newcomb, the president of Maryland consulting firm A.G. Newcomb & Co. "They have this ripe opportunity and are uniquely positioned to serve this sector. I do believe that their ability to succeed is critical to the future of community banks."
Newcomb says borrowers are looking for their bank to be a partner in creating their company. "Small businesses crave highly personalized relationships and the larger banks cannot offer that," she says. "If community banks truly take advantage of this opportunity they can establish deep and broad relationships that are highly profitable."
A rise in entrepreneurialism is particularly true now. Startup activity is increasing as people who are unable to find work turn to ingenuity to make a living. Those entrepreneurs are brimming with chutzpah, but can lack know-how, bankers say.
"A lot of our bankers felt they had lenders who were spending a lot time giving borrowers a fundamental education of loans," Childears says, adding that there are plenty of established entrepreneurs who say, "I might be good at my business but I still don't really understand the financial world."
The site starts with the basics, explaining the elements of creditworthiness and preparing a business plan with lots of links to other websites. There is also an events calendar with events such as a workshop on the Small Business Administration and an interactive web seminar about special loan programs sponsored by the Colorado Lending Source, a not-for-profit small-business financing consultancy.
"We set out to create a portal of opportunities so customers can understand where they are most likely to get a loan," says Bruce Alexander, the president and chief executive of Vectra Bank Colorado, a unit of Zions Bancorp. and the association's chairman-elect. "It is important that the consumers know about the various forms of capital available and the roles banks play versus other types of sources."
The site also offers what it calls the "Colorado Lender Grid" where borrowers can get details about a myriad of other options including: community development financial institutions, or CDFIs; municipal programs; and federally sponsored programs, such as those guarantees provided by the SBA and the Department of Agriculture.
Community development lenders, which are certified by the Treasury Department, are designed to extend credit to companies or individuals that are unsuited for traditional bank programs.
"Helping new businesses is part and parcel to the model of CDFIs," says Jeannine Jacokes, the chief executive of Partners for the Common Good in Washington and a board member of the Coalition of Community Development Financial Institutions. "They are able to provide that one-on-one technical assistance to walk them through those early stages of their company."
The bankers association agrees that CDFIs can play a role in helping fledgling businesses. Still, banks are apt to court those entrepreneurs once their companies have matured.
"We are much better off long term in helping people get started versus just saying 'no' and throwing them out the door," says Keith Dickelman, a senior vice president at Home State Bank in Loveland, Colo., and the association's chairman. "Once they get established, they are going to remember who helped find that solution."
"We can partner with nonbank lenders to help them get started. They might be better suited there," Childears adds. "But in the long-run, the hope is that some would migrate back to the banking industry."