Ask an Expert: Small businesses often seek big banks' help

— -- Where do small businesses go to finance their business? The typical answers are banks, friends and family, and lately, crowdfunding. I would like to focus on that first answer today — banks.

There is a perception out there I think, actually a misperception, that small businesses tend to bank at smaller banks. Actually, the vast majority of small business loans are done by big banks. That said, while small businesses do rely on big banks, one thing I think is less well known is that big banks equally rely on small business. We provide a significant portion of the loans they make. Since small business needs big banks and big banks need small business, and as I have done a fair share of work with large financial institutions and know they are committed to small business, I thought it would be a good idea to interview a banker and get their input as to the state of small business and small business lending today.

As such, I recently sat down with Robb Hilson, Small Business executive with Bank of America (a company I do some work with) to talk small business and big banks.

Q: Let's start with the state of small business today. Of course the economy and jobs are on everyone's mind. How are things from your perspective?

A: We recently conducted an in-depth survey on this very subject ("The Small Business Owners Report") and the results were very encouraging. The survey looked at the responses of 1,000 small business owners with revenues between $100,000 and $5 million, and who had between two and 99 employees.

The survey found that 61% of these small business owners expected their business to grow in the next year. So small business owners are seeing increased demand for their services and I can also report that we at the bank are seeing increased demand for more credit. In addition, loan approval rates are up, and our lending to small business is up 21% over this time last year, so that is a very good sign.

Q: One thing that seems to frustrate a lot of people is that access to credit seems more limited today. Is that accurate?

A: What we found in the survey is that 78% of those who applied for a loan within the last two years were approved. As I said, approvals are up. And maybe as opposed to popular perception, you do not have to be a big small business to get a loan. Let me give you an example. More than half of our small business loans go to businesses that make less than $250,000 a year. So the credit is definitely there.

Q: What can a small business owner do, then, to increase their chances of getting a 'yes' on their loan?

A: Not surprisingly, the small business must be able to demonstrate the ability to repay the loan. We look at all sorts of things when making this determination, but I would suggest that what is key is your cash flow, strategy, leadership, management, and resources. Additionally, a good business plan is of course essential, as is your ability to articulate your vision in that plan. So good communication between you and the banker is important. We are committed to that.

Q: You mentioned the small business survey that you recently conducted. Was there anything in there that you found surprising?

A: I thought this was a very interesting statistic: Small business owners found running their business to be three times more stressful than raising children.