Surveys can sometimes reveal shocking information. For instance, when British teens were asked if Sherlock Holmes was a real historical figure, 58% said yes. While amusing, this misconception highlights an important lesson in understanding your audience. For a generation that spent significantly more time in front of screens than reading the works of Sir Arthur Conan Doyle, they might not have another point of reference for Sherlock Holmes beyond what they’ve seen in movies and TV. Absent familiarity with the short stories and books about Holmes, the teens naturally would have assumed the wildly popular character was based on a true story — otherwise, where did he come from? That context adds more color to the teens’ assumption. Context is equally important in surveys of professionals. When the Independent Community Bankers of America recently asked small business owners what they thought of their community banks, 95% said they were satisfied. That’s encouraging, but one statistic doesn’t tell the whole story of what makes a small business stick with a financial institution. It is still a challenge for community financial institutions (CFIs) to land new small business clients in the first place.CFIs looking for ways to be more competitive in attracting small businesses might want to check out a survey by PYMNTS. While the survey of 525 small and medium-sized businesses (SMBs) with revenues of $10MM or less found that only 32% of respondents preferred small banks or credit unions over larger regional or national banks, it also revealed some important clues about where CFIs need to focus when trying to court small businesses. Where CFIs Can Stand OutBefore CFIs can win over small businesses, they need to understand what these clients are looking for in a banking partner. Below are three areas where CFIs already excel and can further lean in to serve SMBs effectively:
- Think small. The smallest businesses have the biggest love for CFIs. While 23% of all small businesses in the survey said they preferred smaller financial institutions, that number rose to 32% among businesses with lower revenues. These smaller businesses were also more open to switching providers — 22% of those earning $150K or less annually said they were considering a change, compared to just 12% of higher-revenue peers. Many of these very small businesses often have special needs like requiring assistance in qualifying for loans or improving financial literacy. By offering programs that address those needs, CFIs can make themselves even more attractive to these very small businesses.
- Finesse fees. A quarter of small businesses said high fees were a problem at big banks, while a whopping 39% said that was true at regional institutions. Yet, only 9.7% complained about fees at CFIs. If you have your eye on landing bigger small businesses, offering better loan rates and terms could be a major plus.
- Get personal. CFIs got high marks for personalized products or solutions, with none of the respondents listing this as a problem. However, small businesses said this was somewhat of a drawback when dealing with large banks (11%) or regional banks (8.2%). Providing a personal touch on products or services is already a known competitive advantage for CFIs, so it’s important to show off this aspect in your marketing to SMBs. Make it obvious what differentiates your CFI from larger institutions and even other CFIs so that the choice for SMBs is just as clear.
Navigating Structural LimitationsWhile CFIs have meaningful strengths to promote, there are two structural realities that may require more creativity to address. These aren’t failures — they’re factors that come with the territory of staying local and operating at a smaller scale. With the right strategies, they can be mitigated or turned into differentiators.
- Geography. CFIs often focus intentionally on serving a defined community or region. While that’s a core strength for many, it could be a drawback for SMBs looking for branch access in multiple locations. In the survey, 21% of small businesses cited geographic limitations as a drawback for CFIs. None said that was a problem with large or regional banks. Overcoming the geographic issue is a tough one, since CFIs don’t have the luxury of building a far-flung network of branches, but there are ways to improve reach. CFIs could enter into strategic partnerships including embedded banking (for example, hooking up with fintechs that can offer lending services outside a bank’s footprint). Banks can also place satellite ATMs in locations without a branch, including outsourcing to new smart ATMs that can offer live video banking.
- Tech. In the survey, 8.6% of SMBs said having limited financial technology and tools available to customers was a problem with CFIs. Only 2.8% cited this concern with big banks. However, it’s important to remember that it’s less about having the most offerings than about having the right offerings for your customer base. When you check in with your top customers, have your relationship managers ask the businesses what capabilities are missing that would make the biggest difference to them. You might be pleasantly surprised by how small the asks are or how aligned your customers are in their wish lists.
Building on Strengths to Attract Small BusinessesSmall businesses continue to value many aspects of community banking, from personalized service to transparent pricing. By doubling down on these strengths while addressing deficiencies in areas like geographic reach and technology, CFIs can expand their appeal to small business clients.To take it a step further, consider conducting regular feedback sessions, such as surveys or focus groups, to stay attuned to the evolving needs of small businesses. Using this insight to refine programs, fee structures, and digital tools will ensure your institution remains a competitive and trusted partner for small business growth.By focusing on creating meaningful and tailored experiences, CFIs can turn challenges into opportunities, helping small business clients flourish while strengthening their own market position.
