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Big banks not the help to small businesses they once were

Posted on Tuesday, December 8, 2015 at 12:34:39 PM

It used to be that small businesses relied on close, personal relationships with their local banks. That's no longer the case. Since the financial collapse almost a decade ago, many small banks have been absorbed by larger - and fewer - institutions.

The banks of today are so big that most times they don't consider the profit margins small business loans get them enough of an incentive. The Wall Street Journal reported that in 2014, 10 of the largest banks in the U.S. issuing small loans lent $44.7 billion. Compared to 2006, when they lent $72.5 billion, this was a drop of 38 percent.

According to the Federal Deposit Insurance Corp., loans to big companies increased by 37 percent from 2008 to 2015. Banks of all sizes, however, went from holding $711 billion in small business loans to $598 billion in the same time period. 

Big banks may have lost interest, but small businesses haven't stopped needing loans. They've turned to non-bank lenders, whose market share has jumped from 10 to 26 percent. But there's a cost to making the switch. Rates for these loans can be very high when compared to traditional bank loans - in some cases, up to 80 plus percent. 

Of course, small businesses always have an option with Home Loan Investment Bank's Ocean Capital division, which offers products and solutions tailored for small business owners.