The Bank in Your Backyard
Monday, June 21, 2010; 12:00 AM

Marilyn O'Neill's company needed money. Nautilus Environmental, the San Diego environmental consulting firm she launched in 2004, had grown quickly. But to continue growing, O'Neill needed about three-quarters of a million bucks--smack in the middle of a recession and on the heels of her company losing about $170,000 during the downturn.

At the same time, the bank she had used since 2006--and the one that held her $550,000 line of credit--increased its loan audits from once a year to four times a year. "I didn't think we should have to do that," she says. "Then the CEO was fired by the board, and it started looking like things were unstable."

So O'Neill began looking to other banks, large and small, in search of funding. Over the course of a year, she talked with about 10 of them, but one community bank in particular, Security Business Bank of San Diego, took an interest in her company. The manager eagerly courted Nautilus and seemed to understand the business.

"He was working so much harder on making this happen than my current bank was," she says. "He kept coming back to me, saying, 'OK, we have these losses in 2009. Help me understand them so I can explain them in a way that gets us through the process.'"

In March, O'Neill closed a $709,000 Small Business Administration loan with Security Business Bank. The money paid off the $498,000 balance on her existing line of credit and gave her about $200,000 to shore up her cash reserves.Yes, it took a year for her to get to that point, but that kind of due diligence is exactly what independent business owners need to practice when choosing a financial partner, says Richard Barrington, personal finance expert, a financial information site that compares interest rates of various products. Choosing the right banking partner means looking far beyond great rates and convenient hours, especially in recessionary times.

First, some good news: Activity in loans backed by the Small Business Administration and other commercial lenders showed signs of renewal in the first quarter of the year, partly the result of more than $1 billion in loan guarantees from the American Recovery and Reinvestment Act. And there have been additional proposals to loosen lending to small businesses. In February, the White House announced plans for the Small Business Lending Fund, which would transfer $30 billion from the Troubled Asset Relief Program (TARP). Now, the fund needs to wind its way through the legislative process.

Meanwhile, small businesses still need to find money. Conventional wisdom says it's better to be a big fish in a small pond, but larger banks may offer more experience in and access to international services or a greater variety of financial products and services, says financial advisor Bruce Fenton, managing director of Atlantic Financial, an investment firm in Norwell, Mass. Some may be able to provide easier access to ancillary business lines in insurance or investing services.

However, the sheer size of many large banks makes it difficult for even midsize companies to have much influence.

That was Julie Parrish's gut instinct. Parrish and Heidi Kennedy are co-founders of Coupon Girls. Last year they shelled out nearly $40,000 to successfully defend their website,, against an allegation of trademark infringement. Parrish and Kennedy knew they needed a line of credit but were afraid that their primary bank, Wells Fargo, wouldn't look too benevolently upon them. Coupon Girls is a fledgling business whose owners found each other online seven years ago and have never met in person--Parrish lives in West-Linn, Ore., and Kennedy lives in Gillette, Wyo. Their credit scores were "in the low 700s," says Parrish. And before Parrish's husband was deployed to Iraq last year, the couple took out $150,000 in loans to renovate their 1977 home, and she racked up $20,000 in student loans obtaining her master's degree in business administration.

"We made some choices, with three kids, that if something should happen to him, the house is secure and I have the skills to support the kids," she says.

So Parrish went into her local bank hoping to borrow money to help pay her attorneys, and within a few days they secured a $40,000 line of credit. Parrish says the bank's manager pushed for the line because he believed in their business.

"There are three reasons why a small business would tend to favor borrowing from a community bank," Barrington says. "One is cultural fit. Another is lower overhead. And, a third, is useful interest in the community."

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