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[caption id="attachment_28391" align="alignright" width="115" caption="Russ Colombo"][/caption]

Small businesses are the engine of local economies, and nowhere is that more evident than in the North Bay.  We rely heavily on small businesses -- many of them family-owned for generations -- for many of our goods and services that are unique to this region. Today, however, small businesses are facing a crisis of confidence.  In the state of California, it is very costly to do business, and we are at a critical juncture on how we ignite small business growth.

Well-intended, recent legislation to infuse capital into the banking system has created the misconception that banks are not willing to lend to small businesses. On the contrary, banks have plenty of capital to lend while many small businesses are not ready -- or able -- to borrow.  Loan demand is low because many business owners are struggling financially or are skittish about taking on more debt. Others are waiting for signs of recovery before they consider additional investments in their business. With high unemployment, unprecedented bankruptcy filings and foreclosures at record highs, the engine of growth is stalled.

A call to action -- the role of banks, regulators and consumers

If access to capital is not the issue, then how do we create an environment of confidence for small businesses?   Banks, regulators and consumers all play an important role.

In times such as these, banks have a responsibility to support the small business owner. This includes a disciplined underwriting practice to help customers maintain fiscally responsible levels of debt.  Relationships are still at the heart of successful banking practices and successful businesses. Banks must invest the time to get to know their borrowers and understand their businesses in order to work with them through the good times and the bad.  Never is this more important than it is right now.

While a high-touch environment is higher cost, it’s worth the investment.  For borrowers, accessibility, partnership and open communication with their bank are critical elements of success. Small business owners who don’t know their banker personally should make an effort to build a relationship. If this is not possible, it would be wise to find another bank.

A good example of a successful banking relationship is one between Bank of Marin and Best Collateral. Four years ago, Best Collateral was looking for a bank that was as innovative as it was; one that would look beyond the stereotypes of the pawn industry and respond with financial solutions to support its goal of revitalizing a misunderstood business. After researching and thoroughly understanding the business, based on its financial health, Bank of Marin structured a multi-million dollar line-of-credit and a commercial real estate loan. The owner of the company is pleased to say, “Today, with Bank of Marin’s help and support, Best Collateral has changed minds about an age old industry.”

In California, the current regulatory environment is making it very difficult for businesses to grow and prosper. We need to encourage growth, not impede it, and we need legislation that focuses on the true needs of small business owners.  Instead of putting more capital into the system, we need to provide incentives such as tax reductions or reinvestment tax credits. This will help lessen the burdens of small businesses and motivate them to reinvest in their business, which will ultimately drive job creation.

Finally, it is important for North Bay residents to shop locally and to support our local companies. We are the greatest driver of change, and our dollars can help keep local businesses in our communities and instill confidence in the system. That’s a New Year’s resolution worth making for the overall health of our economy.

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Russell A. Colombo is CEO of Bank of Marin. He can be reached at president@bankofmarin.com.