Magazine article American Banker

Survey Finds Hidden Gold in Micro-Businesses

Magazine article American Banker

Survey Finds Hidden Gold in Micro-Businesses

Article excerpt

Contrary to popular belief, owners of businesses with fewer than 10 employees and only $500,000 in sales can be very profitable bank customers, according to a recent survey.

"There are so many micro-size businesses that the segment represents a huge profit opportunity," said Michael Anzenberger, BankAmerica Corp. vice president for small-business marketing.

Traditionally, one-person consulting businesses have been considered synonymous with laid-off executives, and banks felt they couldn't make money by offering them commercial accounts.

But bankers who have devised accounts for this segment have discovered a healthy source of revenue from the business and the personal financial relationships.

"If you match them to the right products, they can be very profitable," said Brian Connolly, senior vice president and director of business development for Boston-based Fleet Financial Group. "The challenge for our bank and all others is to develop the right products."

That view was reaffirmed by a recent study that found 60% of those small- business owners use only one bank for the bulk of their personal and business finances. Such a strong bank relationship means the entrepreneur uses multiple products and services, and generates more revenue for the bank.

Also, more than 87% of the 940 business owners surveyed had bank relationships for their business finances. Twenty percent also use mutual fund companies and 12% use brokerage companies.

The entrepreneurs also tend to use leasing and commercial finance companies for their business needs, and use insurance companies for retirement plans, as well as for property and casualty insurance.

Almost all the small-business owners surveyed blur the lines between their business and personal finances. A quarter used personal loans, such as home equity loans, to finance their businesses, and 63% have business loans secured by their personal assets. …

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