Many small businesses say banks are victimizing them
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Most small companies that are facing higher fees or interest rates from banks believe their lenders are taking advantage of them because of the industry’s woes, a new report says.
A December survey of 670 small- and mid-sized businesses showed that 35% of small firms said they were paying higher bank fees or interest rates than six to 12 months earlier. Of that group facing higher charges, 55% believed their lenders were being unfair and were penalizing them because of the turmoil in the banking sector.
Forty percent of small companies paying greater fees or rates said they were sympathetic to banks’ plight, and were ‘OK on a temporary basis,’ at least, with higher charges.
Of the mid-sized companies in the survey, 37% said their fees or rates had gone up. Of those companies, 44% believed their banks were being abusive, while 48% said they wouldn’t complain.
My colleague E. Scott Reckard has a story in The Times today about how two Southern California companies believe their bank, City National, has unfairly squeezed them.
In the Greenwich survey, ‘Corporate executives gave many examples of banks that they had been doing business with for years putting existing credit lines on hold, being slow to renew lines or even failing to respond to applications for credit,’ Greenwich consultant Steve Busby said. . . .
But as Reckard’s story notes, the banks too are under enormous pressure to avoid adding to their heap of bad loans. They’re naturally more cautious -- unfortunately, at exactly the time the credit-starved economy needs them most.
Banks always turn more nervous about new lending when the economy tanks. The difference this time is the severity of both the economic downturn and the credit crunch.
Still, in that context, I’m surprised that the majority of small- and mid-sized firms in the Greenwich survey said their banks had not raised fees or rates on them. Or at least, not yet.
-- Tom Petruno