Many US banks consider small businesses as high risk and costly to serve. But in our densely populated and well-located state, sitting advantageously between Philadelphia and New York, New Jersey’s network of banking institutions acknowledge this segment’s power and potential, and vie for its business.
And rightly so, when considering the numbers: The latest stats from the US Small Business Administration show roughly 844,000 small businesses operating in the state, representing a whopping 99.6 percent of our business base. The segment employs 1.8 million, or 50 percent of the state’s workers, and recently introduced 21,500 net new jobs.
Specifically, what are local banks doing to attract this vital market segment? To find out, New Jersey Business spoke to executives at four leading financial institutions in the state – Atlantic Stewardship Bank, ParkeBank, PNC and Valley National Bank.
Vibrant Activity and Creative Solutions
Atlantic Stewardship Bank is seeing “nice, vibrant activity by small businesses looking to move forward,” Paul Van Ostenbridge, president and CEO of the institution, reports. “Many small businesses are recreating themselves based on consumers’ changing demands. The need to be resilient and change along with those demands is what’s driving them to the bank, where they access the guidance and financial support required to move to the next level.”
Because small businesses are changing, banks need to create more customized solutions for their needs. “Years ago, lending was like a commodity. Banks had three or four types of small business loans and forced customers into those models,” Van Ostenbridge claims. “Today, it’s all about finding tailor-made solutions that are more appropriate for meeting small businesses’ needs. On the flip side, this scenario makes it more exciting for lenders to get creative, as they seek the best financial product line to help them move forward.”
One such service is Atlantic Stewardship Bank’s new Express Loan product, which provides a 24-hour decision turnaround for loan requests between $50,000 and $250,000, and closing within five business days. “Industry-wide, larger companies are accustomed to waiting up to 90 days or more for funding,” Van Ostenbridge states. “Our Express Loan product demonstrates our recognition that when small businesses ask for financing, they need a quick answer and fast access to the approved funding.”
This need and others, in part, are discovered by Atlantic Stewardship Bank’s new business officers who conduct small business outreach by going door-to-door in various communities to find out how the bank can help. In addition to the bank’s traditional commercial lending managers, this team has its boots on the ground to ascertain local small businesses’ needs, then work to assure the bank provides the products that meet them.
Keep Asking What’s Needed
Like Atlantic Stewardship Bank, ParkeBank firmly believes in constantly asking small business owners, “exactly what they need from us, and though those changes can sometimes be painful for a bank, that’s how we all learn and grow,” asserts Daniel Sulpizio, senior vice president and director of retail banking for ParkeBank.
As a result of that small business community feedback, ParkeBank now holds seminars, one specifically for CPAs – that address how to protect their small businesses and clients – from cyber fraud to identity theft. It recently launched a medical/dental product – an unsecured line of credit up to $100,000 – targeted specifically to these small business professionals. The bank also supports programs that provide veterans with the opportunity to translate their skill sets and military experience into successful small business ventures.
“We have many alternate services and delivery channels available and more are on the way,” Sulpizio states.
He adds that he had always worked for large regional and national banks until he came to ParkeBank 10 years ago. The difference now is the ability and commitment to take time with small business clients and prospects to provide the highest level of service.
One note of advice: “Small business owners wear several different hats and sometimes believe they can only borrow when times are tough,” Sulpizio remarks. “But the best scenario is to build a relationship with a bank that will provide advice and solutions about how to grow, not just bail you out.”
A Focus on ‘Mom and Pops’
Small businesses seeking assistance from Valley National Bank primarily are small “mom and pops,” with one to two million dollars in revenues. The bank recently expanded its product offerings for this segment, including lines of credit and term loans with advantageous rates and little to no closing fees. The firm also has a suite of products exclusively geared to small businesses operating in low and moderate income areas in the state, including Newark, Passaic and Paterson.
Daniel Sorrell, first vice president of community lending for Valley National Bank, notes that while many of New Jersey’s small businesses have self-financed over the years, the improving economy is driving them to the bank. “Companies that traditionally self-financed are growing to the point that they now need bank financing. Many just can’t expand further with their own personal wherewithal, and have reached the point of critical mass that requires a bank behind them.”
While Valley National Bank has always addressed the needs of small businesses, Sorrell says he joined the firm several years ago specifically to bring a stronger focus to this segment. “Since larger loans make banks more money faster, myriad smaller loans are not always exciting to them – but for us, they are an important market,” Sorrell says. “‘Mom and pops’ and other small businesses are a primary employer necessary to New Jersey’s tax base. When the economy improves, there is robust growth in the small business community. Consumers as well as larger businesses purchase more from them, creating a cascading effect that directly impacts the health of this state. Banks play an important and exciting role in this progression.”
Understanding More Than Financial Requirements
At PNC, the value-add delivered to small businesses is listening and understanding where they want to go – and why and how. More than the financial package, PNC seeks to provide solutions based on completely understanding each firm’s specific vision, culture, challenges and growth requirements.
To better enable this comprehensive understanding, PNC has created internal, targeted Employment Business Resource Groups (EBRG) focused on segments such as women, veteran, Latin American, African American, Asian and more. Each unique EBRG is comprised mostly of employees who share a common dimension of diversity, such as gender, sexual orientation, heritage or military service, among others.
“Fostering a culture of diversity, inclusion and understanding better prepares us to work with, and meet the needs of, the myriad small business owners serving New Jersey’s diverse population base,” Bob Young, senior vice president and Central New Jersey territory manager for PNC’s business banking team, tells New Jersey Business. “Our state, for example, is home to nearly 400,000 veterans and [millions of] residents who identify as African-American, Hispanic or Asian. Our goal is to connect with these diverse communities and the small business owners who support, employ and serve them.”
As near-term economic growth continues, so does the confidence and tenacity of hope expressed by small and middle-market business owners: In PNC’s recent US survey of this group, three quarters (77 percent) expressed hope or enthusiasm about the business climate. The survey confirmed that US economic expansion is the third-longest in US history and will continue in 2018.