The Role of Small Business Banking in Economic Growth

Small businesses are important for a lot of reasons, but especially for contributing to economic growth. For example, the Small Business Administration (SBA) reports that small businesses generate two out of every three new jobs in the US. They also contribute to the development of unique products and services as well as stimulate economic activity among local communities. So, where does small business banking come into the economic equation.

The Importance of Small Business Banking

Small businesses rely on banks for most of their finance needs, including managing cash flow, investing in equipment, production, and technology, and financing their operations. Banks provide small businesses access to loans, lines of credit, checking and savings accounts, and other services that they need to succeed. This means that banks play one of the most crucial roles in keeping businesses on their feet and ensuring long-term growth.

When small businesses are supported in this way, it in turn makes an impact on economic growth. Regional banks are well-known for holding nearly one out of every three small business loans provided by banks (approximately $169 billion by the end of 2022). The better access small businesses have to lending options, the easier they will be able to secure funds for product innovation, expansion, business investments, and job creation that help stimulate the economy.

The success of small businesses is also reliant on funding and support from banks considering they typically don’t have the plethora of resources and staffing that big corporations or conglomerates do. So in order to stay competitive in the marketplace, they need extra support.

How Regional Banks Help Address Small Business Challenges

Running a small business is challenging enough as it is, banking shouldn’t have to be. Many small business owners have reported some common concerns they have had with their banking experiences, including:

• Finding it difficult to obtain financing. Big banks often see them as riskier borrowers which can make it harder to secure loans.
• Facing higher interest rates and fees than larger, more established companies.
• Being offered inflexible or unreasonable lending terms. Short repayment periods, collateral requirements, and other restrictions make it hard to manage cash flow.
  

To help small businesses with these challenges and focus more on growth, innovation, and economic impact, regional banks often advocate more deeply for small businesses within the bank to help them secure the funds they need, understand their working capital, and investment for business expansion.

Regional banks also have the capability to understand a small business’ unique needs and challenges. They are embedded in the same communities these small businesses operate and drive economic growth in, giving them a leg up in helping businesses succeed and keeping economic growth steady.

What Small Business Banks Have To Offer

Facilitating economic growth by allocating capital efficiently, providing essential financing to foster innovation, and helping companies invest in large projects like infrastructure development and technology advancements is truly the backbone of small business banking and its role in the economy. Here are some of the most beneficial services that small business banks offer:

• Checking accounts with minimal to no fees or minimums
• Savings accounts that help build funds for future financial health
• Loans and lines of credit for business, commercial/industrial loans, and real estate loans
• Treasury management services to manage cash flow, speed up collections, and manage disbursements

You can get access to any of these economy-critical services here at Republic Bank – give us a call at 800-526-9127 to get in touch with our expert representatives. Plus, check out our resource library for more financial tips.