As U.S. small businesses strive to carefully manage their finances and overhead, they should look to community and regional bank partners for innovative financial products.  Local bankers serving local businesses remain foundational to small businesses’ financial success.

These smaller firms often need the services large global banks offer and should be able to look to their community banks to provide both specific small business products and a unique relationship – allowing them the best of both worlds.

Why the small business market?

One of the last strongholds for regional and community banks is the small business customer. This sentiment is reinforced by recent research from Business Intelligence indicating that Small- and Medium-Sized Businesses (SMBs) are vital creators of wealth, income, and jobs in the global economy.

These firms make up 99.9% of all private sector businesses in the U.S. while employing almost half our country’s workforce. The income and assets of these businesses make them an irreplaceable customer base for financial institutions.

According to a 2022 Deliotte study:

The new wave of small businesses presents a generational moment of customer acquisition in which banks stand to win or lose the lifetime reward of providing financial services to that business.

The time to act is now.

Small businesses are ready for new technology and expansion

According to an FIS Small Business PACE survey, nearly all small businesses reported finding at least one “silver lining” during the pandemic.  Most businesses adapted to the pandemic by altering, in one or more ways, how they do business – leaving behind positive changes that helped propel them to greater productivity in 2022.

Pandemic-related changes made by small businesses included:

• Technology adoption and increased efficiency are the most frequently experienced “positives” from small business responses
• Nearly all businesses say they expect to adopt or improve technologies in the next 12 months
• About six in ten businesses responded by opening new lines of business or changing their products/services
• Three-quarters of businesses say they benefited in some way from customers changing their buying behaviors

Bankers need to think differently

These PACE findings indicate small businesses are willing to try new ways of conducting business. These new ways extend into areas such as cash flow, operating more efficiently, and digitally managing their financial positions.

Address needs in accounting and payments

In a recent Cornerstone survey of small businesses, many small business owners and executives – particularly those from larger organizations – expressed an interest in getting accounting and payments services from a bank.

Roughly four in ten small businesses with revenues greater than $5 million said they would “definitely” consider a bank for accounting, invoicing, bill pay, and payment acceptance services. This creates a tremendous opportunity for community and regional bankers.

Offer products to increase productivity

The importance of integrated accounting software for small businesses should not be underestimated.

According to recent research from MetLife and the U.S. Chamber of Commerce, small business owners likely work far longer hours than the average American and sleep far less than the recommended eight hours per night. During those long working hours, they spend 5.6 hours working with clients or customers, another 3.7 managing staff, and about four hours on administrative tasks.

Better use of tech can help owners manage time, increase efficiencies throughout their business, and feel better about their overall business health.

Offer digital products businesses require

Running a modern business requires flawless, robust cash management functionality. Businesses need reliable services to initiate payments, collect money owed, and efficiently manage complex financial operations.

Yet today’s small business managers are themselves consumers who demand simplicity in the form of fast, seamless, and modern digital experiences. Today’s businesses customers expect more from their financial institution. They want cash management tools with extensive feature sets, sophisticated fraud defenses, and comprehensive risk-management capabilities delivered in a simple, easy-to-use package.

Financial institutions able to meet these needs will be strongly positioned to attract and retain business banking customers 

Form partnerships to expand product lines

Community bankers should also consider offering products that help small businesses via a one-stop specialized portal that can offer such specifics as domestic and international payments of any type including ACH and wires, reconciliation and fraud detection, and the ability to easily access credit digitally.

The right partner can help bankers expand their portal into a wide array of other solutions needed by small business, and often not considered by the small business owner as available from a banker.

These solutions could include such services as:

• Data security services
• Managing social media presence and perception
• Automated Board of Director reporting

The small business market provides an attractive opportunity for regional and community banks. Offering these customers robust financial solutions is key to locking and retaining these valuable relationships.