Banking Small & Mid-size Businesses is Good Business for Community Banks

Posted on Tue, Aug 12, 2014

By Julie Story, Executive Vice President of Pinnacle Financial Strategies
As a segment of the market that is underserved by the large national and regional banks, local businesses present a wealth of opportunity for community banks.

This means you can grow your deposit base quicker with new business customers than you can by pursuing only consumer accounts. And business banking relationships are more profitable and last longer than do consumer retail relationships.

Not only do business customers carry higher average balances and stay with you longer, businesses have owners and employees who need personal banking products and services. This means you have the opportunity to earn new retail customers through just one business relationship.

Advantages community banks have in attracting local business customers

  • Greater insight into local business needs and trends.
  • Perceived as more ethical, friendly, open, and a greater value than larger institutions.
  • More flexible, responsive, and willing to deal with local business relationships.
  • Profitably serve smaller relationships much more effectively than larger institutions.
  • Greater ability to lend profitably to local businesses.

Benefits to community banks of expanding business customer base

  • Diversify your portfolio by adding local businesses to consumer customer base.
  • Increase average account balances because business accounts carry higher average balances than consumer accounts.
  • Meet the needs of community-based businesses that are the foundation of the local market.
  • Serve businesses, business owners and their employees helping to grow both business and retail customer base.
  • Create opportunities to provide products and services that grow with business customers.

Impact of great service and convenience

Business Banking Consulting

Research shows that business customers visit a branch at least twice as often as retail customers. J.D. Power and Associates noted “business customers bank in person at the branch more than twice as often as retail customers.” And business customers are highly responsive to service quality. This is a major advantage for community banks excel in knowing their communities, understanding their customers and providing exceptional customer service.

Value of the full relationship

You’ve heard it with retail customers... cross-sell, deepen the relationship and get more share of wallet. The deeper the relationship, the longer you will have the customer and the more likely he or she will choose you to meet additional financial needs. You have even greater opportunities with business customers. When you earn the right to be the bank of choice for the business, you also have the opportunity to get the personal accounts of the business owners and their employees. You have now multiplied your opportunities for relationships and accounts through your efforts with one business. That’s the value of business banking.

How will you go after and convince local businesses to bank with you? Which businesses will you start with? How will you get the word out that your bank is the place for business banking?

You need the right tools and the right plan. Contact our business banking experts at 713.868.3333 or simply --click here-- to see how you can own your business market.


Tags: Small Business Banking, Business Banking, Community Bank News