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Small businesses make up more than 99 percent of Massachusetts companies, according to the U.S. Small Business Administration.
And as more people turn to entrepreneurship, banks and credit unions have sought opportunities to work with these businesses as lenders, technology providers and advisers.
Banks could even have a role in helping small businesses avoid a common end.
“One of the biggest reasons why most businesses fail is poor financial management,” said Samalid Hogan, director of the Massachusetts Small Business Development Center Network’s Western Regional Office.
Personal Touch
According to the SBA, Massachusetts had almost 670,000 small businesses in 2019, a 2.5 percent increase over 2018.
These businesses have multiple needs from their banks, including merchant services, lines of credit and holistic support, said Hogan, who works with western Massachusetts businesses. The MSBDC provides services and training through a partnership between the SBA and the Massachusetts Office of Business Development.
Hogan said owners often encounter challenges with onerous paperwork requirements when requesting lines of credit or with lenders who look only at credit scores and not at trends on the credit report.
Banks that consider the relationship from the business owner’s perspective tend to do better for their customers, Hogan said.
“They look at the process from the point of view of the customer experience,” she said. “That’s really what a small business needs – more lenders and banks that are approaching them that way.”
Having an intermediary at the bank – someone a business owner can call “my banker” – is also critical for small businesses, Hogan said.
“This individual makes sure that the small business owner is able to get quick answers and fast service,” Hogan said. “That helps out a lot to have that personal touch.”
The MSBDC’s training opportunities include courses on financial management tools. Hogan would like to see lenders provide more training and services on these types of tools as well as on financing – how to finance responsibly, different types of financing and reasons for pursuing loans. She added that she doesn’t see many lenders doing this kind of education for their small business clients.
Strategic Questions
One Springfield bank starting to work with small businesses is New Valley Bank & Trust, a de novo bank that opened in 2019.
Jeffrey Sullivan, New Valley’s president and CEO, said the bank was founded because he and others thought the community needed a new lender focused on small businesses, including providing more services through technology.
Diane McLauglin
“Because we’re brand new, we’ve been able to procure technology that is really focused on making business owners’ lives more efficient,” Sullivan said, adding that the bank this quarter plans to roll out an online account–opening tool for businesses and individuals.
New Valley’s staff also acts as advisers to customers, Sullivan said, moving beyond fulfilling orders or opening accounts to helping business owners think about big strategic questions.
“We are able to build relationships because we’re so close to our customers,” Sullivan said. “Our key decision–makers are out on the front lines every day working with our customers.”
Financial Wellness
Another opportunity for banks to work with small businesses could help them avoid poor financial management, a factor Hogan noted as contributing to small business failures.
Ohio-based KeyBank, which entered the western Massachusetts market in 2016 by acquiring First Niagara Bank, designed a program called Key@Work to help. The bank works with business owners on their financial wellness, and branch managers, considered the small business experts at KeyBank, spend time visiting companies each week, said Courtney Jinjika, KeyBank’s senior vice president and regional retail leader for Connecticut and Massachusetts.
Employer financial wellness goes hand in hand with employee wellness, Jinjika said, and the Key@Work program provides employees with free financial education and individual assessments of their own financial wellness. She added that KeyBank plans to expand this program in 2020 and recently hired a Key@Work specialist.
KeyBank also looks to make the wellness program convenient for customers. Last quarter the bank introduced an online tool that allows customers to schedule appointments with bankers, including meetings outside normal branch hours and at locations convenient for the customer.
Financial wellness sessions focus on reviewing products and services available through the bank as well as a customer’s own behaviors.
“What we found in the past was many banks were order–takers, or, with the advancements in technology, clients were self-diagnosing the product that they needed and coming into the bank and sharing that,” Jinjika said. “We wanted to step back, and we want make sure that what we’re delivering to a client is appropriate and will actually advance their financial wellness.”
