December 6, 2013

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Little Shop on Main

Small Business Lending Will Never be the Same

By Brock Blake

December 6, 2013

Not long ago, bankers and small business owners were partners along Main Street. When a local merchant needed a loan for short-term cash flow needs or wanted to finance expansion, they would sit across the desk from each other and come to terms. Often, they were even on a first-name basis.

This isn’t the way it’s done today.

It’s an interesting time to be part of the small business-lending infrastructure. The way Main Street businesses get the financing they need is becoming less and less reliant (with a few exceptions) on the local bank. In fact, over the last 15 or so years, as community banks are disappearing, bankers are generally less inclined to work with the shopkeepers on Main Street.

If you’re asking yourself why this matters, you should know two out of every three net new jobs are created in these businesses, and somewhere around half the workforce is employed there. Main Street matters.

And Main Street grows on
borrowed capital.

There are some who believe what I call the myth of Shark Tank. It’s great TV, but in reality very few small business owners are scalable enough to interest an equity investor. It’s very unlikely the guy who fixes your car, your favorite local restaurant or your florist would ever be able to convince a venture capitalist to invest in their business.

Nevertheless, there is still reason for small business owners to be optimistic. There are lenders taking creative approaches to helping you and your Main Street business find the financing you need. It’s just unlikely it will be your banker.

Alternative Lenders

If you’re one of the lucky small business owners who are able to leave the bank with a loan (only about 10 percent), you’ll enjoy a lower cost of capital than the rest of your colleagues on Main Street. Of course you’ll have to wait a month or two to get it.

Alternative lenders who focus on special, niche financing products that cater to specific financing needs, like equipment finance, accounts receivable factoring or merchant cash advances, focus on getting you capitalized quickly—often within 24 hours. Sometimes cost of capital takes a back seat to access. Although interest rates might be higher than a term loan at the bank, they are often less expensive than using a personal credit card and don’t require a personal credit score of 700.


The U.S. Securities and Exchange Commission recently made it possible for small business owners, via a recognized crowdfunding platform, to solicit capital from small investors—a potential boon for Main Street. Internet sites like, and have the potential to dramatically change the way business owners, including start-up and idea-stage owners, find the capital they need.

This new position by the SEC reverses a Depression-era law designed to protect potential investors from unscrupulous “businessmen” selling door-to-door securities at the time. In my opinion, the SEC’s new position on crowdfunding has the potential to help a lot of small business owners, as well as savvy investors with a stomach for the risks associated with small business lending, to make a healthy profit.

The Community Bank

That doesn’t mean there aren’t bankers who have figured out how to maintain profit margins while contributing to their local communities. Traci Flynn at Holladay Bank & Trust is just such a community banker. Holladay Bank is a single-branch bank, established in 1974 with a mission to serve its local community. It is a great example of what a community bank can do to breathe life into Main Street.

“We work with a lot of small business owners who have good, healthy businesses, but aren’t perfect. They might not meet the restrictive standard of norms and requirements set by the bigger small business lenders in our area, but have proven to be great small business loan customers,” she says.

Flynn and Holladay Bank understand the importance of Main Street businesses to their local community and spend extra time looking for creative ways to mitigate a less-than-perfect credit score by doing more to understand the borrower. Of course there are credit thresholds they won’t go below, but they’re committed to giving every potential small business borrower in their community the best odds of success they can.

Will we ever see the days when you could walk into your banker with nothing more than a great idea and walk out with a loan? Probably not. But in many ways the variety of new options available could be a real boon for Main Street just the same. 

Brock Blake is CEO of Lendio. 


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