Several business owners I’ve spoken with in recent months say they’re turning more to regional or community banks and credit unions for their banking needs, and it’s no wonder. The major banks don’t appear able to help them anymore.
Government stress-test results on 19 major financial firms being released tomorrow are expected to show that the major banks will need an additional $75 billion, according to one Citi analyst. The stress tests are being done to determine how the banks would fare if the economy worsens. (Bank of America, according to a WSJ article today, was already notified that it faces a roughly $34 billion capital shortfall.)
We’ve written that many community banks and credit unions are helping to fill the lending void in recent months, though clearly they can’t fill the gap nearly enough. Many business owners have likely done their own analysis and figured out they’re better off sticking with local banks right now because at least they can have more personal relationships with the lender. (Though small banks have surely faced their own troubles in recent months.)
All the same, today’s banking crisis is sure to change how business owners view the security of banking institutions and how much they rely on banks as a sole source for financing. Many entrepreneurs feel burned and let down by their bank’s actions in recent months – and have had to scramble for alternatives. What’s more, I suspect some entrepreneurs are rethinking their banking relationships altogether: Do they really want to be so reliant on a funding source that’s proven itself unreliable?
Readers, do you think the financial crisis will change how business owners view their relationships with banks and which ones they decide to do business with?
Photo: Associated Press
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