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Is Alternative Lending from Industrial Banks Right for Your Business?

April 5, 2022
industrial banks Credit Suite

What are industrial banks? What makes them different from commercial banks? More importantly, are they a better source of lending for small businesses? Let’s find out. 

Industrial Banks Are Not New 

These banks are also called Industrial Lending Companies (ILCs). They have roots way back in the early 1900s. That’s when large companies sometimes offered banking services to their employees. Some of these later ventured into the commercial banking realm. In fact, you’ll probably recognize a few. For example all of the following crossed over from industrial bank to commercial. 

  • Goldman Sachs
  • American Express
  • Merrill Lynch Bank USA
  • Morgan Stanley Bank
  • GE Capital Bank
  • And GMAC Bank
Check out our Credit Suite Credit Line Hybrid, where you can get up to $150,000 to help your business thrive.

Industrial vs. Commercial Banks

The difference between industrial and commercial banks relates to services and structure.

Industrial  Commercial 
Longer repayment periods, often for 15 or 20 years  Financing and repayment periods are typically shorter periods of time 
Do not offer checking accounts. May focus on a single product line, such as auto loans or credit card payment processing Customers can open savings, checking, or money market accounts and certificates of deposit 
Offer limited services, usually installment loans for consumers and small businesses  Earn profits from interest-bearing loans they offer to customers, such as mortgages, personal loans, business loans, and more 
Most are located in Utah Located throughout the U.S. 
Many do not have traditional branches Traditionally offer a number of in-person branches
Limited to states that permit them Exist in all U.S. states 

Currently, only 7 states in the U.S. allow these institutions, and over 90% of these types of banks are in Utah. 

Why Use These Banks for a Business Loan?

It’s simple really. Traditional banks often deny small business loan applications. Due to less regulation, other types of lenders can be less strict. They may be able to offer approval where traditional lenders cannot. 

Check out our Credit Suite Credit Line Hybrid, where you can get up to $150,000 to help your business thrive.

Are Industrial Banks Safe?industrial banks Credit Suite

There is no oversight from the Federal Reserve. However, that does not mean these institutions are unregulated. In fact, deposits are FDIC insured. There is also oversight from the chartering state. Currently, only Utah, California, Colorado, Nevada, Hawaii, Indiana, and Minnesota charter these ILCs.  

Check out our Credit Suite Credit Line Hybrid, where you can get up to $150,000 to help your business thrive.

A Legit Funding Option?

They aren’t a bad option for small business funding. In fact, it may be easier to get approval.  However, terms and rates may be higher. Still, to get the most out of all your business funding options, business credit is a must. Find out more about building business credit now. Schedule a free business finance assessment from one of our specialists. 

About the author 

Faith Stewart

Faith has a BBA with a major in Accounting, and a combined 20 years of experience in the fields of finance and account.

Before switching to writing, she spent 10 years working in various areas of small business and personal finance and accounting, including working as a public auditor at BKD, LLP, Financial Director at Central Arkansas Development Council, and Commercial Credit Analyst at Farmer's Bank and Trust.

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