Growth Strategies

Credit Still Scarce for Small Companies

A survey of businesses' favorite banks reveals ongoing tensions.
Alix StuartJanuary 27, 2011

The relationships between small businesses and their banks continued to be tense in 2010, according to Greenwich Associates’s annual survey of banking experiences for companies in the $1 million to $10 million revenue range. Overall satisfaction levels were down across the board, in large part because companies were having a hard time borrowing, according to Chris McDonnell, a vice president at Greenwich Associates.

The national mean for satisfaction scores dropped several percentage points from 2009, which was already in decline. Not surprisingly, about one-quarter of the businesses surveyed reported having switched banks over the course of the year, up from a traditional norm of about 11%, according to McDonnell.

While banks are becoming increasingly comfortable lending to larger, more-stable companies, many remain wary of loans to smaller businesses, which are still viewed as risky. McDonnell sees a nearly one-to-one relationship between a company’s size and the ease of borrowing.

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Among the several thousand banks that were evaluated by the 14,000 small-business executives surveyed, 34 had scores strong enough to qualify as winners of Greenwich Excellence Awards, which recognize a number of categories. One category that saw meaningful changes relative to previous years was “credit policy,” which includes banks’ willingness to lend. Only 5 banks received sufficiently favorable scores to make the cut in that area in 2010 (see table).

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Four of those 5 banks — BB&T, First Citizens Bank & Trust, First Tennessee, and SunTrust — were also among the 15 that came out on top in terms of overall satisfaction. In general, the banks that rated the highest were those that were able to get out there and talk to their customers and put fears in context, says McDonnell.

The biggest banks, including Bank of America, JP Morgan, and Citigroup, were dominant in the survey’s “international services” category.

On the positive side, companies that are considered creditworthy by banks and are looking to borrow are getting very competitive terms and pricing, says McDonnell, since in general, banks are vying for these accounts and want to be able to report that they’re lending money.

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