Best Small Business Program

Summary Analysis

ixty-eight percent of small business owners say one of the six largest U.S. banks is their primary financial institution, according to research conducted by Raddon, a division of the core provider Fiserv. The share of the small business market claimed by these banks—JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Citigroup, PNC Financial Services Group and U.S. Bancorp—has been consistent since Raddon first conducted the survey in 2008, says Senior Research Analyst Marcus Rothaar. Small business banking may be a strong suit for many community banks, but the big banks win on market dominance.

To determine which of the 10 largest U.S. retail banks has the best small business program, Bank Director examined small business loan volume, growth in small business loans over a two-year period from 2014 to 2016 and the number of U.S. Small Business Administration loans approved by each bank in 2016. The definition of exactly what is a small business loan can differ from bank to bank, so Federal Deposit Insurance Corp. data for nonfarm, nonresidential as well as commercial & industrial (C&I) loans of $1 million or less was used. Bank Director also incorporated information from J.D. Power’s U.S. Small Business Banking Satisfaction Study and consulted industry experts.

Wells Fargo topped the ranking for its small business program, demonstrating the highest volume of small business loans and SBA loan approvals. The bank also managed to score highly for small business loan growth, which can be a difficult feat given the size and scale of Wells Fargo’s business. The bank generated almost $37 billion in small business loans in 2016, outpacing the rest of the industry. The bank’s sizable coast-to-coast footprint, along with an array of products offered to small business clients, is a key strength for the bank, says Marty Mosby, director of bank and equity strategies at broker-dealer Vining Sparks in Memphis, Tennessee. He suggests that new community banking head Mary Mack’s push for a higher level of service could fuel further growth, despite questions about the bank’s treatment of customers in the wake of the fraudulent account opening scandal. While small business owners were impacted by the scandal, the accuracy of the reported small business and SBA loan data has not been called into question.

“We’ve invested in small business specialist[s],” Mack said at a Morgan Stanley conference in June 2017. “We’ve invested in business advocacy programs. So that if somebody comes into our branches, there’s somebody in the branch who knows something about small business that can help with whatever their needs or questions are.” Twenty percent of small businesses in the U.S. identify Wells Fargo as their primary financial institution, which is on par with Bank of America, according to Raddon.

Chase controls 13 percent of the market and came in second in the category, ranking highly for SBA loan approvals and small business loan volume and excelling in J.D. Power’s ranking. Chase successfully balances technology with service in the branch, diminishing but not eliminating the importance of a relationship with an individual banker, says Jim Miller, senior director of banking services at J.D. Power. “[Customers are] taken care of by Chase as a whole.”

U.S. Bancorp is third, and posted the highest level of small business loan volume and SBA loan approvals of the regional banks in the ranking. Capital One Financial Corp.’s small business loan volume has grown significantly and contributed to its fourth place ranking. BB&T Corp. saw the highest level of small business loan growth, driven in part by the bank’s acquisitions. Overall, BB&T placed fifth.

Despite holding a high percentage of the market and posting the second-highest small business loan volume at almost $34 billion, Bank of America placed sixth in the category. The banking giant only grew loans by 2 percent and scored poorly for the number of SBA loans approved. But Bank of America has been adding bankers to fuel small business and middle-market growth. “We felt like we could get more market share and so we’ve hired a number of relationship managers across the country in an effort to be more local where we are,” said Tom Montag, Bank of America’s chief operating officer, at the June 2017 conference.

TD Bank came in at seventh, SunTrust Banks at eighth and PNC at ninth. Citigroup, a bank perhaps better known for its relationships with large corporate entities, placed tenth. All four banks saw declines in small business loan volume over the two-year period examined by Bank Director.

“Main Street is improving. BB&T is improving,” said BB&T Chief Executive Kelly King in the bank’s second quarter 2017 earnings call. Optimistic small business owners will continue to fuel success in the banking industry as businesses seek capital to fund their expanding businesses.

How They Ranked

Did You Know?

everaging existing relationships and technology are some of the ways the biggest banks in the country are growing loans. A survey of small business owners and decision makers conducted by the Mercatus Center at George Mason University found that almost three-quarters of respondents whose firms sought capital initially chose the source of that capital due to a preexisting business relationship. Relationships matter, but that may not be a relationship with a specific banker, but instead a reliance on digital channels or other products offered by a bank.

For example, each of the 10 largest U.S. retail banks has credit card products targeted to businesses. JPMorgan Chase & Co., which placed second in this category ranking and topped our category for the best credit card program, has a credit card program for small business customers called Ink. Capital One Financial Corp., which came in just behind Chase for its credit card program and placed fourth in the small business ranking due in large part to its high level of small business loan growth, has a credit card brand called Spark.

For small businesses, credit cards are a primary source of capital, says Sam Kilmer, senior director at Cornerstone Advisors. (Family loans are the other.) “It’s only when you [get] to a certain size of the business that you really get into the kinds of loans that banks are interested in making,” he says. More than three-quarters of small business firms above $100,000 in annual sales use a company credit card, according to Raddon, a Fiserv subsidiary. These cards can be the entry product that ultimately creates a deeper relationship. “[Banks] might actually use it as a lead that they can offer a banker in a branch to then call that client and discuss other products and other services,” says Marukel Maxwell, a partner at the consulting firm McKinsey & Co.

Credit card product lines also lend themselves to testing innovative approaches, says Kilmer. It’s a scale business that relies on automation and quick decision making, which has allowed companies like Capital One to better analyze data to drive revenue compared to other banks. Improving digital services and products for small business clients has also become increasingly important. The expectations of small business owners and entrepreneurs are largely set by their experiences as consumers, says Jim Burson, senior director at Cornerstone Advisors.

“There is very little difference between what motivates a small business owner and a consumer. They want to do business when they want to, they want to do business on their iPad, they want to do business quickly and simply, and they don’t want a lot of paper documentation. So we are very mindful of trying to be the easiest bank to do business with,” said Douglas Petno, head of commercial banking for Chase, at a conference in November of 2015.

The biggest banks are leveraging digital and data to ease the loan process for small business customers. Chase partnered with the digital small business lender On Deck Capital in 2015 (whose subsidiary is OnDeck); OnDeck provides the technology platform, and receives origination and servicing fees on each loan, and Chase funds the loans, which remain on the bank’s balance sheet. The two companies announced in August of 2017 that the collaboration will continue for at least another four years. It is unknown how many loans Chase has generated through OnDeck, but the partnership undoubtedly contributed to the bank’s growth in small business loan volume during the period of time analyzed by Bank Director.

Wells Fargo is among those banks that have internally invested in improving their loan processes for business clients by leveraging current relationships and making quicker decisions digitally. “If you’re a Wells Fargo customer, you can go online and you can open up or apply for a [business] loan and [we’ll] give an answer in 45 seconds or 60 seconds or something like that,” said Wells Fargo Chief Executive Timothy Sloan in the bank’s second quarter 2017 earnings call.

Small business clients increasingly expect a wide array of products and services from their primary financial provider, along with digital channels so they can bank on their own schedule. Banks that can meet those expectations are likely gaining market share—or at least holding onto it.