69% of Small Businesses Would Switch Banks

When 69% of small business owners say they would switch to a bank which provides all the features and services they need, there is a problem. Even more distressing is the fact that only 9% of owners say their bank addresses all their small business needs. This means 91% of owners feel banks are not delivering.

This small business banking trends data comes from the BlueVine survey, “The State of Small Business Banking in the U.S.” And it shows small businesses are being underserved by banks. Consequently, this can lead owners to seek alternative funding sources, some of which are questionable at best.

Considering the number of people small businesses employ and the impact they have on the economy, more ought to be done to support their efforts. This is what Eyal Lifshitz, CEO, BlueVine, addressed in the report for the survey.

Lifshitz says the survey shows compelling evidence demonstrating the lack of banking services small business owners receive. This includes rewards, financing and even basic customer service. Lifshitz adds, “There are vast improvements that can be made to serve small business owners who often cover the roles of both CEO and CFO and are seeking an end-to-end banking experience.”

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2019 Small Business Banking Trends

According to the report, there’s a widespread willingness to switch to a new bank. This is being driven by some of the previously mentioned reasons. However, it also includes other services banks don’t provide but are important for owners as they run their business.

The first one, which applies to anyone with a bank account, is the high fees banks charge. As it applies to small businesses, 65% say they pay fees, but for 15% of them it is much too high. The average small business customer is paying $451 in fees annually.

Some of the fees are service or maintenance fees, in-network ATM fees, bill-pay fees, incoming wire fees, paper fees and transaction-minimum fees. However, paying these fees is not translating to service or features benefiting owners.

They say deposit checks are not showing up fast enough (7%), not offering overdraft protection/ability (6%), and poor customer service (5%) is a problem. While dealing with service-related issues, they are also contending with limited access to capital.

Capital

Access to capital is a problem for 39% of the respondents in the survey. This group says getting lines of credit, loans and credit cards is difficult from their current bank.

Citing the Biz2Credit Lending Index, the report points out big banks approve only around 26% of loans to small businesses. Almost the same amount or 27% are not able to get adequate financing. And when they can’t get the financing from traditional lenders, they go elsewhere. In 2018 almost a third or 32% of small businesses went to online lenders seeking financing.

In addition to being underserved and not getting access to capital, small businesses say banks are not providing the same reward levels as large companies.

Poor Rewards

In this survey, small businesses say (17%) they are not getting the same rewards as their corporate counterparts. The level of rewards and benefits with leading-edge products and digital solutions is not the same as large organizations.

image: BlueVineThe less than expected rewards by small businesses extends to the growth of their checking and savings account. With a national interest rate average of 0.09% (savings) and 0.06% (checking) as of September 16, 2019 (FDIC), there is little growth there.

The good news is small businesses now have access to more sources for capital and financing. The latest initiative from Splitit is an example of what is available. This company makes recurring payments available for B2B buyers and sellers, but this is just one example.

If traditional institutions don’t give you the capital you need you have options. But it is extremely important to point out you have to find a reliable and proven lender.

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