Banks' Relationship with Small and Medium-Sized Businesses Improving

Banks are giving the cold shoulder to small and medium-sized businesses less often than in the past, says a current study by Hart & Associates Management Consultants Ltd. The study, which polled 615 companies in Toronto, Montreal, and Vancouver, found that businesses with annual sales between $500,000 and $100-million were generally satisfied with the service they receive from banks. However, business clients were less satisfied with the personnel management and customer service provided by banks, citing a major gripe as the short tenure of bank managers, which averages 2.5 years.

Key Takeaways:

Small and medium-sized businesses are generally satisfied with the service they receive from banks, with 71% of respondents stating that they are either satisfied or very satisfied.
Business clients are more satisfied with the mechanical functions of banks, such as mailing out statements, than with the way banks manage personnel and deal with customers.
The average tenure of bank managers is 2.5 years, according to the Hart survey, which is a major issue affecting the level of service provided to business clients.
Banks are having trouble lending to developing firms in the "new economy" that lack collateral, with 62% of respondents stating that they would prefer to lend to traditional companies that manufacture things with fixed assets.
Banks are recruiting personnel from the industries they are trying to serve to better understand and support the needs of new businesses, such as startups and small companies in the service sector.
Innovative financing means, such as backing exports even if funds are not forthcoming for production or product development, are being explored by banks to support the growth of small and medium-sized businesses.
Political pressure from Finance Minister Paul Martin's budget commitments to aid small business is urging bureaucrats to find new ways for banks to lend and support the growth of new businesses.

Statistics:

71% of small to medium-sized businesses with annual sales between $500,000 and $100-million are satisfied or very satisfied with the service they receive from banks.
62% of respondents would prefer to lend to traditional companies that manufacture things with fixed assets rather than developing firms in the "new economy".
The average tenure of bank managers is 2.5 years, with 85% of respondents stating that this is a major issue affecting the level of service provided to business clients.

Sources:

Hart & Associates Management Consultants Ltd.
Canadian Bankers Association, president Helen Sinclair
Financing the New Economy, a report by Paul Torriel of Industry Canada