Capital One Ranks Best for Small Biz

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NEW YORK (MainStreet) — The 2010 Small Business Bank Study is out and a trio of high-profile banks atop its “consumer best” list made some huge gains in consumer satisfaction in just one year.

The study, released by Power Consulting, comes out at a time when the relationship between small businesses and big banks is as tenuous as ever.

According to another study from the Pepperdine University Private Markets Capital Project, small business growth has been hampered by its limited access to financial capital. Only 40% of U.S. small firms have access to the financial resources they need to grow. And there's more:

  • Lenders and investors reject 90% of loan applications or investment proposals that would be secured by a business’s real estate holdings.
  • They also reject 73% of loan applications or investment proposals that are based on a business’s cash flow.
  • Slightly more than 50% of business owners surveyed had obtained capital from friends and family for money. One-third obtained capital from bank loans.

Given this backdrop, it would seem that the big banks have a heavy load to haul in regaining business owners’ trust. Which banks are doing it? According to the Power study, Capital One (Stock Quote: COF), JP Morgan Chase (Stock Quote: JPM) and Citizens Bank top the list.

All three banks score 84 possible points out of 100, based on the Power Consulting ratings formula. Citizens Bank made the biggest leap, from 10th place in the 2009 Power study to second place in 2010. Chase did almost as well, jumping from 12th to third place. In the process bigger banks overtook mid-sized banks in this year’s survey of small business banking customer satisfaction (700 respondents were included).

"Last year it was the mid-size regionals that dominated the top categories," says Frank Aloi, president of Power Consulting. "[But] these larger institutions have clearly been focusing on the right things to improve customer experience in the critical small business marketplace."

Still, U.S. banks overall only earned a “C” from small business owners, averaging a score of 77 in the study rankings. That’s about where entrepreneurs marked banks in 2009 as well. "We would expect average customer experience scores to be higher for this segment," notes Aloi. "Overall, there has not been much improvement."

The study produced some disturbing news for banks: Only 78% of business owners said they would do business with a bank, based on their experiences trying to open an account. The study says that 36% of banks did not bother to ask about a small business’s size when opening an account, and about 20% didn’t ask business owners what mattered most to them from a banking relationship.

"Bankers will be more successful in expanding their small business client base if they take the time to learn about those customers' business dynamics before recommending products," notes Aloi. "But many important questions about the customer's business are simply not being asked."

Clearly, small business owners believe their businesses are underappreciated by banks. Just as clearly, most banks – even the mid-sized ones that would seem a natural fit for regional businesses – need to do a much better job of demonstrating that small operations are appreciated.

The good news is that 2011 is a brand new year and a brand new opportunity for banks to show small businesses that they matter.  Some have already acted on that issue, but many more would benefit from following suit.

If you're a business owner looking for some help, check out MainStreet's tips on how small businesses can find the financing they need.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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