You may have heard the old saying: if you owe the bank $1000 and can't pay, you have a problem. If you owe the bank $1 million dollars and you can't pay, the bank has a problem.
I always liked this expression, because it flips the usual power dynamic on its head.
Banks have the money and therefore it seems they have the power. But sometimes it can go the other way.
Small and medium sized businesses "are important customers for banks since they represent the majority of bank business customers," noted the Canadian Bankers Association in a press released tied to Small Business Week, adding that firms with fewer than 100 employees make up 98 per cent of the businesses in Canada.
So why is it then, that small business owners are less satisfied with their banking experiences than regular customers? That's the conclusion of a recent study by marketing information firm J.D. Power.
"Small businesses have more in deposits and they borrow more," says Jim Miller, the senior director of banking at J.D. Power.
"In terms of interacting with the bank, they come into the branch three times more than the average consumer, on average 33 times a year."
Miller says all of that should add up to small business clients having a higher level of satisfaction with their banks, and a stronger relationship than someone with a personal account.
But the opposite is true.
And despite the fact that Canadian entrepreneurs are more likely to be assigned an account manager than their American counterparts, in many cases they don't feel that their level of service is as high as they'd like. This is how the major banks ranked in the J.D. Power survey:
- 1 - Scotiabank
- 2 - The Royal Bank
- 3 - Toronto-Dominion Bank
- 4 - Bank of Montreal
- 5 - CIBC
"Banks need to do a better job in managing all aspects of the relationship with small business, especially when you consider the importance of these relationships," says Miller.
Michele Allinotte of Cornwall Ontario would agree. She set up her law firm in 2009, specializing in real estate, wills and estates, and business law.
"I was working for another firm before I started this firm," says Allinotte.
Results don't surprise
"So I had a personal loan that I wanted to transfer to the business. The process was lengthy and took a lot of time, and when the offer finally came back, it was worse than what I had."
Not only did the bank offer her an interest rate than was half a percent higher than what she had, but it also wanted to close her various lines of credit and have her husband guarantee the money her company would borrow.
Really?
In this day and age, a husband had to guarantee the loan?
Allinotte is actually understanding about that.
"Just the way we had our finances, not a lot was in my name," she rationalizes.
"But just the same, if I'd known that I'd get a worse offer than what I had, I wouldn't have gone to all the trouble that I did to try and change the loan."
Chris Jackson of Calgary-based Roneta Professional Search doesn't find J.D. Power's survey results surprising at all.
They reflect his experience with his bank almost exactly.
"Our bank is convenient to use and they're generally responsive and professional," says Jackson, whose partner at Roneta is my brother Mike.
"But I wouldn't say the service is outstanding. I'm not sure any bank would be."
I was curious to know what a bank would have to do to impress him as "outstanding."
More contact wanted
"Maybe the odd call to say 'hey hope things are going ok, we've noticed something about your business and we may have an opportunity for you'. That would be nice to see," says Jackson. That is precisely what J.D. Power found in its research.
Many entrepreneurs wished that they heard from their account managers more often.
Marion Wrobel of the Canadian Bankers Association disputes the findings of J.D. Power. "We've surveyed small business customers and we found that 78 per cent say they have a positive relationship with their financial institution," he says.
"We think there is actually a very high level of customer satisfaction."
Wrobel says that the relationship can be as extensive as the customer would like.
Jim Miller of J.D. Power acknowledges that there are some excellent service providers in our banking system – the firm isn't tarring the entire industry with the same brush.
Even so, he has some advice for entrepreneurs.
"They should have certain expectation of what their bank will provide, and when those expectation are not being met, they should look at what other options they have."
He's talking about switching banks.
But Michele Allinotte tried that.
"I went to another bank and told the manager about my loan situation, and said 'if you can give me everything I want, I'll switch'. He didn't get back to me."
Well, I have two words for her, and anyone else who isn't satisfied with their bank. Credit. Union.
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