Nearly one-third of small-business owners would switch banks if their institution were acquired by a larger rival, according to a recent survey by PSI Global.

The Tampa research firm surveyed the owners of 890 businesses with annual sales of $500,000 to $10 million.

Forty-six percent said they would stay with their bank if it was acquired, and 22% said they would wait to see the effects of the merger.

"They are really afraid of losing the contacts and personal relationships they developed over years at a smaller bank," said Maria Erickson, PSI senior vice president of corporate services.

Colorado entrepreneur Steven D. Foss understands why a business owner would want to switch banks after a merger. Mr. Foss said he was pleased with his community bank in Colorado Springs, until a superregional bought it and changed his loan officer.

The new loan officer made Mr. Foss complete more paperwork and submit audited financial statements when he tried to renew the credit line for his company, which repairs semiconductor assembly lines.

"The bank got rid of all their bad customers, and they started treating the good customers like they were bad ones," said Mr. Foss, who moved his account to another community bank in Colorado Springs.

Mr. Foss' experience and those of other small-business owners does not bode well for banks in the midst of major mergers.

The blockbuster merger announcements of last week- NationsBank Corp.'s agreement to link with BankAmerica Corp., and Banc One Corp.'s deal with First Chicago NBD Corp.-could impact hundreds of thousands of small- business borrowers.

The four banks, which all rank among the top 10 bank lenders to small businesses, had a total of more than 600,000 small-business loans outstanding at midyear 1997, the latest figures available, according to Sheshunoff Information Services.

A First Chicago spokesman said the bank wants to retain small-business customers but has not set any plans to do so. A NationsBank spokesman said few customers would be affected by the merger because the banks overlap only in Texas and New Mexico.

According to the PSI study released last week, more than 47% of small businesses were directly affected by a bank merger in the last five years, and 25% of the entrepreneurs surveyed switched banks as a result. The business owners who get multiple products from one bank are the least likely to switch after a merger, the PSI study found.

Offering cash management and electronic payments products such as direct-deposit payroll services may be another key to retaining small- business customers. The study found 80% of business owners who use those products stayed with their bank after a merger.

"If they use daily balance reporting services for multiple accounts, their banking services get so tied into the way they do business that it is difficult to switch," Ms. Erickson said.

Mr. Foss offers different advice for banks going through a merger: Focus on personal services, including those that attracted customers in the first place. "We look forward to a really long relationship with the bank we use now, unless they get bought and we have problems with them," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.