Tight Credit Erodes Satisfaction with Banks
Small-business executives are becoming less pleased with their bankers, according to a survey by the American Institute of Certified Public Accountants.
After polling 2,000 chief executives and chief financial officers of small businesses nationwide, the group concluded that cautious lending practices have harmed certain banking relationships.
Among the executives surveyed, 75% said their bankers are "very" or "moderately" willing and able to support their companies' business goals. Last year, 86% gave their bankers such high marks.
For Bankers, a Call to Action
"While it's encouraging that three-quarters of our respondents are pleased with their bankers' performance, it is clear that the recession and credit crunch have affected bankers' relationships with the middle market," said Jerrell A. Atkinson, chairman of the private companies practice section of the accounting group and a partner in the Albuquerque-based accounting firm of Atkinson & Co. "Bankers will need to take some proactive steps to bolster that trust."
Mr. Atkinson's statements are supported by the group's data on the difficulty that businesses encounter in obtaining loans. According to Mr. Atkinson, 60% of the small-business owners said banks were applying tougher lending standards. Two-thirds said they had been asked for more collateral, personal guarantees, more restrictive covenants, and more paperwork in the loan approval process.
"Only 17% said they'd been asked to pay higher rates," Mr. Atkinson noted. "It's not the cost of money, but the way it's being administered that is breaking down the relationship between bankers and their customers."
|The Loyalty on Both Sides Is Gone'
Fifty-seven percent of the respondents, who had annual median sales of $3.19 million, said they had borrowed money in the last 12 months.
Mr. Atkinson said his clients perceive that banks aren't in "partnership" with the businesses anymore. "The loyalty on both sides is gone," he said. "We're seeing banks who are more aggressive in listing their services and their charges. The bank statement looks a lot like a phone bill, and it's just as hard to understand."
"These findings corroborate anecdotal evidence that funds are hard to come by," said Steven Kaufman, a partner in the Bethesda, Md., accounting firm WS&B/Kaufman. Since the nation's seven million small businesses account for close to 40% off our GNP, this yearlong difficulty with obtaining credit may have significant impact on the country's long-term economic health."
Most Expect Recovery Within a Year
Even though the executives surveyed generally believed the financial climate for their businesses had deteriorated in the past three years, they are still optimistic about the future. At least twothirds predict economic recovery within 12 months.
The executives also say they are looking for help managing cash flow. One-third said uneven cash flow is their greatest financial obstacle. Cash flow was the No. 1 concern for all regions, industries, and company sizes, in a finding consistent with previous years. Insurance costs and availability were also major concerns.
The poll found that Buffalo, Atlanta, Indianapolis, Dallas, and Seattle were considered the areas most likely to experience significant urban and business growth.