This Month's Headache: Small Business Lending
How would your bank respond if Obama's Small Business Lending Fund were passed by Congress? What would you use it for?
This Month's Remedies: Prescribed by Michelle Gula and Jay Brew
"Run for the hills!" is the reaction you should have to the proposed small business lending fund. No matter how attractive the program may appear, community banks must avoid government assistance in any form.
President Obama generated excitement when he mentioned community banks in his state of the union address. Traditional community banking has long been the strength of our nation's wounded financial system. While dealing with loan issues caused by the recession, community banks continue to lend to borrowers who have the financial strength to pay back their loans.
The government shows its ignorance in assuming community banks need some kind of assistance to promote lending. This only adds to the public's misinformation that banks are not lending and that community banks need help.
The reasons why community banks should not take any government assistance:
Rising Above the White Noise
From the logo on your coffee mug to the TV spot you'll see just before you drift off tonight, the average person encounters about 3,000 marketing impressions every day. It's become white noise, and as a result, people have become far more selective about what to pay attention to, and more importantly, believe.
Public Distrust is Still Very High
Try explaining anything about banking to the person on the street. Citizens are still up in arms about bailouts, and their level of distrust is very strong. If your bank takes part in any government program, you will be part of the public's confusion, no matter how strong the reasons are for participating.
To boot, take the administration's assertion that big-bank compensation packages in the multimillions are the same as the high pay sports stars receive. This further fuels public anger. Big bankers took bailouts; sport teams did not. Sports are entertaining; big banks are not!
We're Misunderstood by the Media
The media has this knack for not understanding what is going on in community banking. We recently had a reporter call and ask for comment on why loan growth declined in 2009 as reported in the national media.
The journalist was surprised when we communicate the fact that community banks between $100 million and $5 billion actually grew loans by 11.08% over the last 12 months of 2009. Does the government realize this?
The Government's CPP Program Under TARP
What started out as a program to strengthen the strongest banks, turned into a nightmare for many of the participating banks. The worst part many bankers bemoaned was that the same government who designed the program was looking at them as weak.
What could happen to the banks who participate in the lending program? Government's good intentions could turn in the political head winds.
Market Your Strengths!
The public needs to be reminded that your bank is financially strong, that it is lending, and that it has not and will not participate in any government assistance.
Your board, management team, and employees must communicate your strengths every day. This includes an internal and external marketing plan that addresses your strengths and potential. Strategic planning around the strengths of your bank and the vast opportunities out there is time better spent than trying to analyze what the government is offering.
As Nancy Reagan said, "Just Say NO!"