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Study Indicates Strong Ties Between Small Banks And Small Businesses

Written by Ken Gaebler
Published: 11/7/2011

A recent study of New Jersey banks reveals that small lenders are dedicating the majority of their borrowing deposits to small businesses.

Despite a tough economy, the relationship between small, community banks and small businesses is stronger than ever before.

Study Indicates Strong Ties Between Small Banks and Small Businesses

The New Jersey Star-Ledger is reporting that a study of FDIC data shows that a large number of New Jersey's smallest banks are committing the bulk of their lending resources to small business borrowers.

The study, conducted by Pennsylvania-based lending advisory firm MultiFunding, focused on 78 New Jersey banks with deposits in excess of $100 million. Leading the list of small business lenders was Heritage Community Bank in Randolph, which reported small-business loans accounting for nearly 60 percent ($77.8 million) of its $130.8 million in deposits.

Similarly, the other top five SMB lenders were small, community-based financial institutions with small business lending of 40% or more of total deposits.

At the bottom of the list were savings banks and large, New Jersey financial institutions like the Provident Bank of New Jersey (7.3%) and Amboy Bank of Old Bridge (4.4%).

For many small businesses, commercial borrowing is an uphill battle. Lack of collateral and other factors often make it difficult for small operations to secure financing for startups and business expansions.

But according to Ami Kassar, CEO of Multifunding, the study confirms the belief that community banks are more willing to work with entrepreneurs to find solutions to borrowing challenges. "We find from our experience much more flexibility and creativity at the smaller banks," says Kassar.

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