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Comment by dghlsakjg

21 days ago

The US also has a relatively huge amount of small banks that are specialized in financing niches. It’s actually a huge competitive advantage. If I want a bank that specializes in loans for PNW fishing boats, that exists, and they are able to competitively price a loan that BoA won’t even consider.

The flip side is that big banks are great at driving down costs for standard operations (when there are enough of them to be competitive). If all I need is a business checking account as a consultant, I can access that for no cost via one of the giants.

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dghlsakjg

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magicalhippo  20 days ago

> If I want a bank that specializes in loans for PNW fishing boats, that exists, and they are able to competitively price a loan that BoA won’t even consider.

What's the specialty here, risk assessment?

  • dghlsakjg  20 days ago

    Niche risk assessment. Or more generically knowing the industry.

    Small banks with a specialty will have loan officers that deeply understand the industry they specialize in and are able to parse a bad deal from a good one.

    If a fishing captain comes in and wants to borrow $75k to replace an engine, that could be a great loan to make or a terrible one depending on factors that require knowledge of boats and the fishing industry. If this captain was paid out $150k last season, the hull has a clean survey and this season has a higher harvest quota, it’s a good deal. If the hull is a floating wreck, and the fishery is likely to be closed or contract this season, don’t make the deal. Bank of America does not have a loan officer who knows how to read a commercial vessel hull survey, or who understands local fishing payout customs, nor is it really worth their time to find that person.

    A bank that has that knowledge has a competitive edge over banks that don’t. The captains in the fleet all know of that bank, and so do the diesel engine dealers.

    In the US, for many industries, there is a bank that maintains that competitive edge, and most of the time it is a bank that you have never heard of.

    This isn’t hypothetical, if you want the loan I’m talking about you probably will end up on the phone with these people: https://www.peoplesbank-wa.com/business/loans-lines-of-credi...