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Convenient location most important bank characteristic according to small-business owners.

Bank websites with lots of bells and whistles may appeal to some, but they are just window-dressing as far as the nation's small-business owners are concerned. Only half do any Internet banking, according to a NFIB National SmallBusiness Poll recently released.

While banks, like most commercial enterprises, are spending considerable money and time promoting their Internet services, those who own and operate small firms say a convenient location is the most important bank characteristic for conducting their firm's banking business, followed by a bank whose personnel know the owner and the business, and a reliable source of credit.

The study found that over the past three years, slightly more than half (54 percent) found technology at their principal bank increasingly helpful. But more than one-third asserted that technology had no impact on them at all, and 11 percent complained that technology is getting in the way.

"The technology is being adopted slowly. However, there appears to be a high comfort level once the change is made because banks are not forcing small employers to use technology," said NFIB Senior Research Fellow William J. Dennis Jr. "More than eight of 10 said their principal bank does not push them to change."

Having their bank nearby is the attribute that ranks highest for owners. Sixty-two percent reported that a convenient location is very important. This could be partly driven by the need to be physically close for cash deposits, especially for retail enterprises. But the reluctance to embrace technology is also a factor. Twenty-seven percent have their principal bank located less than five minutes away from their business and another 35 percent have it located five to nine minutes away.

Owners also see proximity as a key factor in getting the bank to know their business and its effect on credit-underwriting decisions. The second most important attribute among small-business owners is the desire that banks know the owners and their businesses. Fifty-seven percent ranked this as a priority. It underscores the continuing concern among entrepreneurs of the importance of personal relationships and service. But there is also an underlying assumption, Dennis said, that in difficult times, a banker with first-hand knowledge about a business will be more helpful than one who is not.

Being viewed as a reliable source of credit came next on small firms' wish lists, with 57 percent also saying it is very important. However, more cite this feature than actually borrowed in the last three years, suggesting that while they have not sought loans recently, they may do so in the future, researchers said.

Fifty-one percent said they wanted or needed to borrow for business purposes during the last three years. Eighty-five percent of those got the last loan they requested. Researchers attribute that to bank competition and a healthy economy. However, 8 percent were never able to get needed funds.

Speed in decision-making, easy access to a loan officer, and a wide variety of services are other characteristics that small-business owners frequently think are very important in a bank.

Most of those surveyed believe the overall level of service quality at their principal bank has not changed in the past three years. The share of those giving favorable marks exceeds those with negative views by a three-to-one margin. The most-rapidly improving aspect of service quality, they said, is the growing number of available services, which came in at sixth on the overall list.

One of the biggest complaints small-business owners lodge against banks is staff turnover. Only half of those surveyed have been served by the same account manager over the past three years. Twenty percent said they had two, 13 percent had three, and 7 percent report having no manager at all to help them.

Small-business owners are generally happy with their banks and they are slowly moving toward electronic banking that will bring greater efficiencies and lower relative costs over the longer term, the report concluded.

RELATED ARTICLE: UK SME growth continues; but service sector hit by world cup fever.

Business activity for UK small and medium sized businesses reached its highest level for two years, according to the PKF SME Index, a quarterly survey of UK SMEs in the construction, manufacturing and service sectors.

Business output rose to 55.5 from 55.3 in Q1 and new business orders remained buoyant at 54.8 (where marks above 50 indicate expansion and marks below 50 indicate contraction). The construction sector signaled the sharpest rate of growth at 56.4, and manufacturing has now recorded four consecutive quarters of rising business activity. The growth in new business orders also continued during the quarter. However, service companies struggling to win new business cited the World Cup as a reason for an unusually quiet June.

Employment levels were at their highest for two years at 52.8, with the manufacturing sector recording their first growth (53.7) since 2004 Q3. The bad news is that business costs rose at their fastest rate since 2004 Q4 at 64.0. Manufacturing companies cited ever-rising prices for steel, copper and oil while fuel and labor costs were the main contributors to rising service sector input costs. All UK SMEs are making a greater effort to pass increased costs to their customers with varying degrees of success. Manufacturers are passing on raw material, fuel and energy surcharges while service providers are increasing their rates, charging higher summer prices, and reducing their discounting.

Mervyn King, the governor of the Bank of England, expressed concern about rising global inflation; holding interest rates at 4.5 percent in the belief that the economy is not growing as fast as expected. "The hefty and ever-increasing costs of raw materials are forcing businesses to put up their prices. These inflationary pressures will make it even harder for UK industry to compete in the global marketplace"

Source: BusinessCreditNews UK

The report was prepared by Ion Scott and Bill Dunkelberg of Temple University. Source: National Federation of Independent Business (NFIB)
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Title Annotation:Small Business Corner: NFIB
Author:Scott, Jon; Dunkelberg, Bill
Publication:Business Credit
Article Type:Survey
Geographic Code:4EUUK
Date:Sep 1, 2006
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