By Rieva Lesonsky

I’ve been writing about small business and talking to small-business owners for nearly 30 years. During that time, community banks have always been a resource for entrepreneurs to get credit and business loans. One of the advantages of community banks was always their personal treatment. It’s easy for an entrepreneur to develop a relationship with a banker at a smaller bank—and it’s also a smart move.

But a few years back, when business financing was easier to come by, many small-business owners fell out of the habit of keeping their business bankers informed about what’s going on with their businesses. With a wide variety of places to turn to for business capital, entrepreneurs didn’t have to rely so heavily on community banks.

It looks like the tide is turning. Obviously, access to capital has been tough to obtain for the past few years, and entrepreneurs once again have been turning to community banks. The Independent Community Bankers of America, an organization of several thousand community banks, reported in March 2009 that its members were acquiring more new customers than before the credit crisis.

In recent months, however, more community banks have failed—largely those that got involved in troubled commercial real estate mortgages. As a result, community banks are facing tougher scrutiny from federal regulators, and in turn are looking more closely at their small-business loan customers, the Wall Street Journal recently reported.

For entrepreneurs seeking business financing, these changes mean it’s back to the old days for community banking. Here are some things you’ll need to know when seeking a loan from a community bank:

Be prepared. Community banks will want a lot of information about your business before they’ll give you a loan. Be prepared to provide everything they ask.

Be open. Bankers need to investigate your business thoroughly to prove the loan is not a bad risk. You’ll need to be willing to grant full access, whether to your financial records or tours of your business facility.

Be communicative. Even after you obtain financing, bankers will expect you to stay in constant contact with them. One entrepreneur cited in the Journal article supplies his bank with monthly financial reports. 

Be honest. Most entrepreneurs are happy to share good news with their bank, but keep bad news to themselves. That’s exactly the wrong approach today. If a key customer is slow to pay, or some aspect of your sales is hurting, be honest with the banker about the problems so the two of you can work together to find solutions.

Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva or visit SmallBizDaily.com to read more of her insights on small business.

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