Bank Location Is Key for Small Businesses
Bank Web sites with lots of bells and whistles may appeal to some, but they are just window-dressing as far as the nation’s small-business owners are concerned. Only half do any Internet banking, according to a recent National Federation of Independent Business “National Small-Business Poll.”
While banks, like most commercial enterprises, are spending considerable money and time promoting their Internet services, those who own and operate small firms say a convenient location is the most important bank characteristic for conducting their firm’s banking business, followed by a bank whose personnel know the owner and the business, and represent a reliable source of credit.
The study found that over the past three years, slightly more than half – 54 percent – found technology at their principal bank increasingly helpful. But more than one-third asserted that technology had no impact on them at all, and 11 percent complained that technology is getting in the way.
‘High Comfort Level’
“The technology is being adopted slowly. However, there appears to be a high comfort level once the change is made because banks are not forcing small employers to use technology,” said NFIB Senior Research Fellow William J. Dennis Jr. “More than eight of 10 said their principal bank does not push them to change.”
Having their bank nearby is the attribute that ranks highest for owners. Sixty-two percent reported that a convenient location is very important. This could be partly driven by the need to be physically close for cash deposits, especially for retail enterprises. But the reluctance to embrace technology is also a factor. Twenty-seven percent have their principal bank located less than five minutes away from their business, and another 35 percent have it located five to nine minutes away.
Owners also see proximity as a key factor in getting the bank to know their business and its effect on credit-underwriting decisions. The second most important attribute among small-business owners is the desire that banks know the owners and their businesses. Fifty-seven percent ranked this as a priority. It underscores the continuing concern among entrepreneurs of the importance of personal relationships and service. But there is also an underlying assumption, Dennis said, that in difficult times, a banker with first-hand knowledge about a business will be more helpful than one with none.
Being viewed as a reliable source of credit came next on small firms’ wish lists, with 57 percent also saying it is very important. However, more cite this feature than actually borrowed in the last three years, suggesting that while they have not sought loans recently, they may do so in the future, researchers said.
Fifty-one percent said they wanted or needed to borrow for business purposes during the last three years. Eighty-five percent of those got the last loan they requested. Researchers attribute that to bank competition and a healthy economy. However, 8 percent were never able to get needed funds.
Speed in decision-making, easy access to a loan officer and a wide variety of services are other characteristics that small-business owners frequently think are very important in a bank.
Most of those surveyed believe the overall level of service quality at their principal bank has not changed in the past three years. The share of those giving favorable marks exceeds those with negative views by a three-to-one margin. The most rapidly improving aspect of service quality, they said, is the growing number of available services, which came in at sixth on the overall list.
One of the biggest complaints small-business owners lodge against banks is staff turnover. Only half of those surveyed have been served by the same account manager over the past three years. Twenty percent said they had two, 13 percent had three and 7 percent report having no manager at all to help them.
Small-business owners are generally happy with their banks and they are slowly moving toward electronic banking that will bring greater efficiencies and lower relative costs over the longer term, the report concluded.
The executive interviewing group of the Gallup Organization collected the data for this National Small-Business Poll for the NFIB Research Foundation. The interviews were conducted between Feb. 2 and March 8 from a sample of small employers. “Small employer” was defined for purposes of this survey as a business owner employing no less than one individual and no more than 249.
This report was prepared by Jon Scott and Bill Dunkelberg of Temple University. Access the complete guide at www.nfib.com/page/researchFoundation. The National Federation of Independent Business is the nation’s largest small-business advocacy group. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its 600,000 members in Washington and all 50 state capitals. More information is available online at www.NFIB.com.