Unlike their larger counterparts that normally make and approve loans by adhering to a set formula of criteria—often without an in-person meeting—community banks do meet in person and apply a variety of standards to approving a loan. They are willing to consider businesses that do not fall into neatly defined parameters. Moreover, loan officers often have an intimate knowledge of the local area and its businesses.

Hands-On Approach

Richard Sanborn, CEO of Seacoast Commerce Bank (SCCB.OB) in Chula Vista, Calif., credits his hands-on approach with local small business owners as a reason Seacoast has been San Diego County’s No.1 Small Business Administration lender for the past two years. "I meet every new business," says Sanborn. "I want to look them in the eye and talk about what they are doing and understand what they do."

Sanborn says Seacoast, which has just over $80 million assets, continues to benefit from developing relationships with its clients. "We get our arms around their business, and a lot of big banks don’t do that," he says. "[In the case of the big banks], if an applicant doesn’t fit in the box, their loan is declined. We try to be creative and come up with a solution that will work. We look at other types of collateral and income to support cash flow, or we think about structuring a deal that is flexible." That means looking at a host of criteria in addition to credit scores, cash flow, and debt charts.

Recently, Sanborn says he completed a deal with a small business looking for a loan that most other banks didn’t want to touch. The company, which planned to buy foreclosed properties and fix them up, had lined up investors willing to put up 50% of the money in cash and needed a loan for the remainder. "This was a startup venture for them, but they had experience in real estate and property," recalls Sanborn. "They are taking foreclosed houses off of the market. It was a win, win, win for everybody."

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