DC small businesses face challenges as more banks disappear

In the past decade, multiple local banks in the greater Washington region have merged or been bought, leaving entrepreneurs and small businesses with fewer sources of capital.

“We’ve lost a lot of banks over the last 10 years,” said Andy Medici, money reporter for Washington Business Journal, during an appearance on What’s Working in Washington. “If you’re looking for choices, if you’re looking for a number of banks to maybe shop around … you’re not going to find that.”

Medici recently reported on the shrinking number of local banks in the Washington Business Journal.

Since 1999, the number of banks headquartered in the greater Washington region has dropped by half, 70 to 36. It’s not just a Washington trend. The number of banks in the nation has dropped from 11,463 in 1992 to 5,170 in 2016, according to the Federal Deposit Insurance Corp.

“You might see all the Cardinal Bank signs going soon. They’re merging with United. Bank of Georgetown disappeared … and Access Bank, they’re buying Middleburg,” Medici said.

“You’re going to have to ask yourself, how many banks will there be around to serve small businesses? Because it’s the small banks that serve small businesses,” he said.

There are solid reasons for banks to consolidate for their own benefit.

“There’s a lot of pressure for banks to sell, whether it’s because regulations cost a lot of money, and it’s also because as a shareholder, you want to make money,” Medici said.

Other industries in the greater Washington area are consolidating as well. In the venture industry, “you see a lot of those big funds getting bigger,” Medici said, “and then you see a lot of small funds. What you’re not seeing is those middle funds, those ones in between where you can get out of that seed stage.”

Searching for the perfect fund size to grow, some startups have started “shopping the west coast to get that money,” he added.

Despite its reputation as a government-centric business environment, Medici thinks D.C. defies its stereotype.

“I’d say that D.C. is a government town the way San Francisco has hills. Sure, they’re there, and you have to drive around them, but that misses the point. There’s a lot there,” he said.

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.