It is well documented that banks are not [easily] providing loans to new Small Business Customers. What I do observe however is that banks are fighting hard to retain the customers that they want to keep.
This got me thinking. If more attractive businesses threaten to leave their bank, unless pricing comes down, then banks will start to feel profitability stress and this will force them to open up their doors to more new business applications.
As a general rule of thumb, a banker needs to write 25% of new business each year just to maintain the portfolio at the same level - ie loans will generally amortise down or move to a new bank every 4 years.
If existing customers also push for price decreases, then this puts further pressure on bankers to meet their profitability targets as the effect is that they will need to write significantly more than 25% more business to stand still. This will impact on senior banker bonuses and this in turn, will put more pressure on Credit to approve more new business.
Its not something that will change over night, but if enough good businesses do this, then it will slowly have the desired effect. In the meantime good businesses will benefit from reducing borrowing costs and transaction fees!
Of course, if you are not an attractive banking proposition, then I would caution you about this strategy as the bank may just call your bluff! If you have doubts, then before you act obtain a Pearl Bank Check which will give you a feel for the likelihood of a new bank being interested in your business (and hence your existing bank being interested in retaining you!).
Please pass this article on to any business owner you know, and together we can improve competition for Small Business Banking!!
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