Despite bankers' efforts to make inroads in the small-business market, operators of small companies are becoming less satisfied with their banks, according to a survey by Trans Data Corp.
Of 500 small-business owners and managers surveyed, 40% said they were "extremely satisfied" with overall banking services, down from 48% last year.
Dissatisfaction Rises
The number expressing some degree of satisfaction fell to 76%, from 81%, while those expressing dissatisfaction rose to 7% from 5%.
The survey indicated that bankers are falling down on account servicing - the hand-holding that small-business owners increasingly need to navigate in tough times.
When a problem arises, "the customer would like to have the institution or the person they contacted tell them they haven't forgotten, so they feel reasured," said Sergio S. Ora Jr., a senior vice president at Mellon Bank Corp.'s Delaware subsidiary.
Mellon has launched a quality-improvement and measurement program to address such customer concerns.
If banks don't close the service gap, business could go elsewhere. Of the small-business people in the Trans Data survey, 10% said they had severed a banking relationship this year. Half of that group cited neglect or inadequate service as the reason.
Nonbanks Get Some Business
Some of that business is gravitating to brokerages, insurance companies, leasing companies, and thrifts rather than to other commercial banks.
Trans Data, an American Banker research affiliate based in Wayne, Pa., did the survey interviews from June to November. It defined small companies as those with annual sales of $500,000 to $5 million.
Industry observers said bankers - distracted by mergers and consolidations, bad loans, and other problems - are letting slip a major growth opportunity.
"The inward focus of banks on consolidations, assets, and survival is taking their eye off of this market," said Kathleen C. Holmes, executive vice president of Furash & Co., a Washington consulting firm. "Add to that all of the changes in the credit environment, and banks just aren't paying attention."
All Had a Bank Link
Despite the complaints, every company in the survey sample had at least one relationship with a commercial bank - most commonly a checking account. Banks also held 90% of credit relationships with those surveyed, up from 75% last year.
The rise reflects a marketing push through many banks' branch networks to sign up small companies. But the sell is apparently not being followed up by adequate service delivery.
While most business officials said they were pleased with the convenience of branch banking, many showed irritation at bank errors and inefficiencies in resolving them.
Personal attention from a banker does not help, the survey indicated, if it is not accompanied by action.
Unhappy with Bank Contacts
More than one in three of those surveyed said their primary bank contact was a branch manager, but 15% of these respondents said they would prefer banking with someone else. Another 25% expressed unhappiness with their commercial lending officer for not offering sufficient expertise.
"The branch manager is the one who always gets kicked when something like cost-cutting happens in the bank," Ms. Holmes said. "With small business covering 65% to 80% of branch costs, most branches can't afford to lose them."
The degree of neglect, not surprisingly, corresponds to the size of the customer company.
Of those with less than $2 million in annual sales, 55% were dissatisfied with the attention they got when problems arose. Only one-third of larger firms indicated dissatisfaction.
Competitors Win Allegiance
Many small businesses said they were beginning to consolidate financial relationships away from banks. The convenience of branches was becoming a lesser priority, they said.
"Nonbank competitors think it's a great market," Ms. Holmes said. "They're actively soliciting small-business owners with new products and new ways of offering traditional products. Add PC delivery, and the larger the business, the less site-sensitive it becomes."
About one of four small-business people said they were using thrifts and insurance companies for investment needs. One of five used brokers or leasing companies, and one in 10 turned to a commercial finance company for borrowing needs.
Brokerages, Ms. Holmes noted, are also becoming more active in asset-based lending.
Ms. Franzoni, a freelance banking reporter, is based in Springfield, Mo.
