90% of Small Banks Meet with Small Business Loan Applicants — Versus 40% for Large Banks

November 19, 2024

Bob Coleman
Founder & Publisher

90% of Small Banks Meet with Small Business Loan Applicants — Versus 40% for Large Banks

Among the largest banks the practice of decision makers meeting with applicants is fairly rare — less than 25% of the time. 

However, 95% of banks with less than $500 million in assets meet with applicants, compared to only 65% of banks with $3 billion to $10 billion in assets.

Small banks have a flatter organizational structure than large banks, particularly in how they gather information. Small banks are much more likely than large banks to have meetings directly between small business loan applicants and decision-makers.

Nearly 90% of small banks meet with applicants, compared to less than 40% of large banks.

These meetings allow small banks to lend more flexibly, especially to start-up businesses, as they may yield valuable soft information that can compensate for a lack of hard information. In-person meetings, as opposed to virtual meetings or teleconferences, further emphasize the importance of banks’ proximity to small business borrowers.

Banks that do not have direct meetings between decision-makers and applicants typically lend to start-ups 26% of the time. In contrast, banks that meet one or both of these criteria have a 56% to 74% likelihood of lending to start-ups 

The specific strategy used to mitigate start-up lending risk varies by bank size. Small banks use meetings with applicants to manage risk. A majority of small banks that hold such meetings typically lend to start-ups (69%), compared to a minority that do not hold meetings (45%) 

There is only a slight difference in the likelihood of start-up lending between large banks that do and do not meet with applicants. Instead, large banks  rely on SBA guarantees to manage risk.

59% of SBA lender large banks lend to start-ups, compared to 25% of non-SBA lender large banks. The corresponding difference among small banks is much smaller, with 71% of SBA lender small banks and 63% of non-SBA lender small banks lending to start-ups.

Source: FDIC 2024 Small Business Lending Survey