The Empirical Study Of The Relationship Between Community Banks And Small Business Loans In USA And The Instructions To China

Community banks are locally owned and operated banking institutions. The size of asset is always less than 1 billion dollars. Community banks have a very brilliant history in USA, but it hasn't been shown up in China. However, more and more people think it's a good idea to set up community banks. It's not only a good choice to integrity the banking and economic system, but can solve the financing problems for small business. The financing problems have existed for many years, which is the key for small business development and also influence the economic growth in that location.The features of community banks are able to get "soft" information and develop relationship loans. "Soft" information refers to get information through people in the long time contact and know each other very well, which is quite different from "hard" information that is mainly operated by big corporations. "Soft" information is hard to identify, pass on or measure. We can't find a standard to measure it, also, it can't express by numbers or characters. But community banks take advantages in having these information because its structure and location. For the reason of structure, community banks have less levels inside than big banks, which means, it benefits communication and transfer the accurate information.This paper combines literacy and empirical methods to explain the relationship between community banks and small business loans. The result shows, from the asset view, community banks in the same asset size conclude the same answer. The size of asset less than 100 million dollars get the positive relation between the small business and community banks and negative relation between the big business and community banks. In another word, small business loans can increase the profit of banks and institutions, big business loans decrease the profit. The result also explains why community banks would like to lend money to small business, the profit. In the other hand, the size of asset less than 1 billion dollars but more than 100 million get the different conclusion. They get the negative relation between the small business and community banks but positive relation between the big business and community banks. The more loans for small business, the less profit the banks can get. That is, with the increasing asset of the banks, they are more like the big banks that good at dealing with the "hard" information and have a complex structure.The next part, I analyze a questionnaire which launched by NFIB about the banking competition for small business. The result shows that banking is the first choice for small business and more than 56% small business choose banks as their financing institutions.Community banks do have reasons to exist and develop, for our country, I think it's not necessary to set up community banks, we can reform the functions of our own banks. We can consider the located people and small business as the preferred customers and perform as the located institutions. This kind reform can perfect our finance system and be good for the location economic and employment.