Anticipated Growth May Spur Small Business Lending, New Accounts, Shows Research from Raddon
Financial institutions have an opportunity to expand market share as more small businesses seek loans and technology to facilitate business banking
LOMBARD, Ill., May 24, 2017 – Raddon, a Fiserv® company and provider of innovative research, insightful analysis and strategic guidance to financial institutions, has published research that shows the majority of small businesses are planning for growth, which they anticipate funding through lines of credit and business loans. According to the Raddon Research Insights: Winning Small Business Customers study, 79 percent of small businesses plan to grow over the long term, which could create lending opportunities for financial institutions.
”When looking for a loan small businesses tend to look to their primary financial institution, so attracting small business deposit accounts can serve as the entry point for future loan business,” said Bill Handel, vice president of research, Raddon. “Financial institutions can win small business customers by demonstrating that they understand business owners’ challenges, have the expertise these customers need, and can deliver the technology and service to help small businesses grow.”
Small Business Growth Creates Lending Opportunities
Of the 79 percent of small businesses planning for growth, about a third (38 percent) said they plan to use a business line of credit for funding, whereas 22 percent said they plan to use a business loan. These percentages rise to 50 percent for a business line of credit and 26 percent for a business loan among larger small businesses with $2 million to $10 million in annual sales.
Importance of Technology
When it comes to deciding whether to use a financial institution’s services, small business customers of major banks were the most likely to cite technology as a factor in the decision. Among small business customers that use a major bank as their primary financial institution (PFI), 66 percent indicate the technology resources available at the institution influenced their decision to use the bank, with 29 percent saying it strongly influenced their decision. Small businesses with a credit union as their PFI also showed a significant interest in technology, with 42 percent saying technology influenced their decision and 16 percent saying it was a strong influence.
Although 91 percent of small business customers still make branch visits in a typical month, technology is starting to reduce branch traffic. Forty-two percent of small businesses indicated they now use branch lobbies and drive-ups less frequently due to the availability of online banking, mobile banking, and remote deposit. Looking forward, one in three small businesses (36 percent) think technologies such as mobile and online banking could potentially replace their need for a branch office of their PFI near their place of business.
Winning Small Business Customers
While major banks currently control the small business market with 68 percent of primary financial institution relationships, there are opportunities for community-based financial institutions to serve more small businesses, with small business owners indicating a likelihood to work with such institutions in the future.
Over 50 percent of small businesses that currently do not use a community bank for their primary or secondary institution said they were extremely or very likely to consider using a community bank in the future, and 38 percent said the same for a credit union.
The research in the Raddon Research Insights: Winning Small Business Customers study was gathered from semiannual surveys conducted in 2014, 2015 and 2016. Each survey of approximately 1,200 small business owners was conducted via an online questionnaire administered through a national online panel of small businesses, with respondents qualified by having decision-making responsibility for financial services for their company.
Raddon, a Fiserv company, has been providing financial institutions with research-based solutions since 1983. Raddon works exclusively with financial institutions and has a unique understanding of the industry, resulting in the ability to apply practical know-how to the challenges and opportunities financial institutions face. Raddon combines best practices in research and analysis with consulting and technology solutions to help institutions achieve sustainable growth and improve financial performance.
Fiserv, Inc. (NASDAQ: FISV) enables clients worldwide to create and deliver financial services experiences that are in step with the way people live and work today. For more than 30 years, Fiserv has been a trusted leader in financial services technology, helping clients achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and insights and optimization. Fiserv is a member of the FORTUNE® 500 and has been named among the FORTUNE Magazine World's Most Admired Companies® for four consecutive years, ranking first in its category for innovation in 2016 and 2017. For more information, visit fiserv.com.
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