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3 ways for community banks to capitalize on the “buy local” movement

October 1, 2014
Read Time: 0 min

Wal-Mart, McDonalds, Home Depot. These large corporations are found in almost every town in America. While many consumers choose to take advantage of their less expensive product offerings, a culture shift is starting to take place. Today’s youth and others across all age groups are placing a significant importance on consuming local food, developing local relationships and improving local communities. This is great news for community banks.

banking with a buy local angleA recent American Banker article discussed why the local food movement is good for community banking. I would take it one step further—the local food movement is a byproduct of a local purchasing movement in general. In light of the financial crisis, the “buy local” movement is fueled by the desire to invest in local businesses, and in turn, help the economy.

Buying local is also fueled by consumer preferences. Lamont Black, assistant professor of finance at DePaul University, argues, “People are increasingly aware that businesses that understand a particular community’s style and taste are better equipped to create products tailor-made to their customers’ preferences.”

There is a real opportunity here for community banks to position themselves within this movement and capitalize on what the consumer sees as their strengths—relationship-based lending, tailored product offerings, and knowledge of the local community. By marketing themselves as a local and more custom alternative to bigger banks, community banks could see an uptick in loan growth. Here are three ways for community banks to effectively position themselves within the “buy local” movement:

1. Partner with small business owners

2. Invest in community engagement

3. Develop a relationship-based lending framework

Partner with small business owners

There is also good news for small business owners (SBOs), as bank-to-business lending is expected to increase in 2014. A recent Sageworks survey of 417 community bank and credit union professionals found that more than two-thirds of respondents expect their institutions to make more commercial loans this year than in 2013.

The relationship between SBOs and community bankers can be mutually beneficial. By partnering with small businesses, community banks can portray themselves as investing in the local economy, while SBOs can expand their businesses through loans.

Invest in community engagement

Due to the changing regulatory and compliance environment, many banks are divesting in community engagement. However, community engagement does not have to be huge drain on your bank’s resources. If budget is tight, consider choosing an organization to aid via volunteer efforts, such as the local food bank.

Organizing a quarterly volunteer opportunity for your employees also benefits the bank directly by encouraging philanthropy and comradery among employees. Be sure to take pictures and include them on your website or send to the local newspaper for publicity.

Develop a relationship-based lending framework

As banks and credit unions look towards small and medium-sized businesses for loan growth and improved asset quality, it is increasingly important to establish a deeper relationship with the borrower and communicate the value propositions the bank can offer.

During the underwriting process, it is crucial for bank employees to not only understand the institution’s products and policies, but also the client’s needs. By doing so, the bank can provide additional business consulting opportunities which can be uncovered through a deep understanding of client needs.

As the relationship progresses, one-on-one business advisory sessions can be an important source of value for business borrowers. These sessions can also benefit the banker by helping to identify and resolve problem loans earlier in the cycle.

To learn more about developing a relationship-based framework at your institution, download this complimentary whitepaper: Doing More for Business Borrowers.

About the Author


Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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