Small businesses once flew below the radar of the nation's largest banks. No more.

Superregionals have discovered what community and regional banks have known for a while: Small businesses can be a lucrative source of revenue.

In an era of large corporate downsizings, small business has been the engine of economic growth and job creation.

Big banks, under increasing pressure to find new sources of interest and fee income, see the small-business market as a natural place to apply their consumer and commercial banking expertise.

Nonbanks also see this as fertile ground and have been making inroads against banks' long-held dominance.

To get a better handle on this competitive market, American Banker worked with Payment Systems Inc. on a wide-ranging survey of small businesses and their financial service habits. The Tampa-based research firm earlier this year surveyed 875 companies with annual sales of $500,000 to $10 million.

The articles that follow explore four key areas from the survey: the growing presence of nonbanks, banks' efforts to sell investment products, the market for cash management products, and the importance of quality service.

For bankers, there is some good news. Every small business in the survey reported it has a relationship with a commercial bank. Almost all of them - 98% - regard a bank as their primary provider. No other type of financial services company comes close.

But commercial banks also face tough competition from nonbanks. More than half of small businesses use leasing companies, commercial finance firms, brokerage houses, or insurers. The main reasons small companies chose a nonbank were the need for specialized services (27%), pricing (18%), and credit (15%)

We hope you find the stories and data informative and useful. Let us know what you think.

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