Connect with the the authors: margarita.vacanti@curinos.com; peter.serene@curinos.com
Growing small business relationships is a central strategic pillar for most banks. But it may not always look that way. That’s because many banks appear to focus on only one part of the small business’s banking needs, to the detriment of cultivating the relationship over time. Banks generally want to occasionally date on the left-hand side of the balance sheet (lending assets) and get married on the right-hand side (operating account liabilities). But increasingly, businesses are saying “Sorry, you can’t have it both ways.”
So if that’s the case, how can banks succeed in growing relationships? Curinos analysis shows that as a business grows its revenues, so too is it looking to its primary bank for advice—both on finances and how to run the business. According to a survey of small businesses (those having revenues of up to $20 million), in businesses with revenues of more than $5 million, 44% of the owners say they want their banking partner to provide advice on their finances, compared with 33% for smaller businesses. Advice on the business itself is sought by 42% of businesses exceeding $5 million, versus 37% for smaller businesses (Figure 1, left side).
Figure 1: Business Banking Preferences | By Revenue Size
Source: Curinos Analysis | 2023 Curinos Business Banking Survey | N = 2,640 | Q62: Where does your company currently turn most often for financial advice such as investment opportunities, succession planning, cash flow management, financial and/or tax planning, etc? | Q60: How important is it to your company that its primary bank provides business advice? | Q24: How much do you personally agree or disagree with these statements? Please read each statement carefully; although some items appear similar, no two items are exactly alike [Completely or Somewhat Agree]
But advice can take the relationship only so far. As a business grows, banks also need to place bets and commit capital to the relationship. But, as businesses grow in size, loyalty diminishes. More than three-quarters of businesses with revenues over $5 million say they shop for the best pricing—seven percentage points higher than smaller businesses (Figure 1, center). And these bigger small businesses are much less in favor of keeping all their deposit and loan accounts with one institution than smaller businesses—52% versus 68% (Figure 1, right side).
What do banks stand to gain with these relationships? Primarily low-cost deposits—and they’re getting them. As of August, the portfolio rate for small business deposits was 84 basis points, well under the 148 bp paid on consumer deposits and the 123 bp paid on business-banking deposits (Figure 2, left side). The discrepancy reflects the high concentration of non- or low-interest-bearing checking—almost two-thirds of all small business deposit balances—used to fund the operating account (Figure 2, right side).
Figure 2:
Average Industry Rates Paid | Jul ‘25
Portfolio Composition by Product | Jul ‘25
Source(s): Curinos Consumer, Small Business, Commercial Deposit Analyzers. Note(s) For Commercial, SB and BB, Non-Interest DDA/Checking includes NIB DDA, ECR DDA, and Analyzed DDA. Interest DDA/Checking includes IB DDA, Hybrid DDA and IOLTA. For Small Business, Other includes Escrow, Off Balance Sheet Sweeps, On Balance Sheet Sweeps, and All Others.
The disconnect is that banks want to continue to reap the benefit of these low-cost deposits but in recent months have become much more fickle on the lending side. Volumes and approvals for lines of credit are way down, and because of stricter underwriting guidelines and reinstating fees, even booked SBA loans are lagging, further compounding credit tightening (Figure 3). What gives?
Figure 3: Small Business Lending – Applications vs. Bookings by Product
YoY Delta through June 2025
Source(s): LendersBenchmark for Small Business Originations. < $5MM commitment amount
Even though overall delinquencies remain extremely low (Figure 4), bankers could be guiding customers away from certain credit products or collateral models that may be out of reach. That might be in response to tightening credit underwriting standards amid diminished lender risk appetite that results in applications being accepted but not booked. Lower booking levels may also be a sign that credit quality is truly on the decline, which could be an early warning sign of broader economic pressure. In addition, banks offer a wide range of pricing for lending, which leaves businesses suspicious that different banks will evaluate their business’s risk differently. One thing is clear: the banking sector is displaying hesitation when it comes to lending.
Figure 4: Small Business Delinquencies – Decadelong Trend
Frankness and Fidelity Matter
This is all happening at a time when businesses are under pressure to adjust quickly to new supply chain demands, an accelerating pace of innovation that’s required for them to stay competitive and a diminishing supply of labor. They’re looking for banking partners who have confidence in their ability to weather macroeconomic pressures beyond their control. And they’re able to see through any effort to win the deposit relationship if that same bank provides credit only selectively when their business needs it the most. That’s why it’s essential that banks communicate clearly to business owners what they are and are not willing to support and align the products being offered with the realities that businesses are facing today.
Above all, banks, no matter what their size, need to offer quality service, advice and an integrated set of resources to their small business clients. Too few banks, for example, offer dedicated bankers to the smaller end of their business portfolio, and only a few among them offer frictionless service experiences when a human interaction is warranted. Yet this is where smaller, regional banks may be able to gain share, especially in today’s market where direct banks and the largest national players are likely to win the day among the more tech-savvy business owner.
Parting message to banks: a successful relationship means you may have to give up dating on your terms. You can’t pick and choose which parts you want, keeping what’s most valuable and eschewing what’s risky. Taking that path could mean that just as your small business clients appear to be trusting you, they’re most likely to leave. And some marital advice for small business owners: shop around for the partner that’s best for you—on your terms, not theirs.
