• A slight majority of small-business owners use two or more financial institutions when conducting their firm’s financial affairs. Thirty (30) percent use two and 22 percent use three or more financial institutions. However, 47 percent still use one exclusively. In almost all cases (94%), the principal financial institution is a bank.
• Forty-one (41) percent of the owners use a small bank (assets of $1 billion or less) with over 15 percent using very small banks (assets under $100 million). Thirty-eight (38) percent of the owners use very large banks (assets over $10 billion).
• Small-business owners perceive a median of seven different banks (not branches) operating in their local market areas. Only 7 percent report just one or two banks. Almost 70 percent indicate that the number of bank locations operating in their local market has grown over the last three years, adding to their choices.
• Small-business owners report that competition for their banking business has increased during the last three years. Forty-three (43) percent say that competition has increased; 45 percent say that it has not changed; and 8 percent think there has been a decline in competition.
• Small employers who believe that competition is greater today than three years ago cite as evidence more: mail solicitations and advertising (74%), banking locations (70%), phone calls soliciting their banking business (65%), financial products and services targeted to small business (65%), and in-person solicitations at events or in their firms (57%).
• Twenty-one (21) percent of owners shopped for a new principal financial institution in the last three years. The two most common reasons for shopping were (1) the hope that a better deal was possible elsewhere and (2) dissatisfaction with the current bank.
• The primary reason that small-business owners did not shop for a new principal bank in the last three years was that they were satisfied with their existing bank (70%). Eighteen (18) percent did not shop because they did not want the hassle of switching and only 5 percent did not shop because of too few alternatives.
• Those who shop the bank market do not necessarily change principal banks. Only one-third of those who shopped changed banks, but many of those who changed did not shop. About three of four who changed banks did so as a result of shopping.
• Ten (10) percent of small-business owners switched principal banks in the last three years. Service and credit issues were the primary reasons that owners give for switching banks. Sixty-four (64) percent say that a reason for change was to obtain better service quality and 47 percent say it was the number and type of services at the new bank. Among other reasons for changing banks, 50 percent mention an expectation that they could more easily satisfy credit needs at the new bank and 53 percent say the new institution would provide better loan terms and rates.