New banks wanted for small and mid-sized companies.

• Position: Survey for mid-sized companies

In mid-August 2010, Greenwich Associates, based in Stamford, Connecticut, announced that 20 percent of mid-sized companies and more than 15 percent of small businesses requested competitive proposals for a new bank in the previous six months. This finding is based on the results of the latest survey conducted by Greenwich Market Pulse, a panel of approximately 30,000 financial decision makers at small and mid-sized companies. The survey had 519 participants.

Historically, about 10 percent of small businesses and mid-sized companies switch banks in any given year. In the context of that traditional average, the current rate at which U.S. companies are issuing bank requests for proposals (RFPs) is truly striking.

In the past year and a half, the share of U.S. small businesses and mid-sized companies requesting proposals for a new bank has been doubling every six months. In the last six months of 2009, 11 percent of mid-sized companies and 7 percent of small businesses issued bank RFPs. In the first half of 2009, approximately 4 percent of mid-sized companies and small businesses issued bank RFPs.

Greenwich Associates consultant Chris McDonnell says, "Unfortunately, it seems that this high level of activity is being driven as much by negative factors associated with the recession and credit crunch as by positive developments such as an increased demand for capital in step with an economic recovery."

Reasons for Issuing RFPs

The most important factor driving the spike in RFPs in the past 18 months has been corporate efforts to reduce banking fees. Roughly half of small and mid-sized companies cite fees as a top-three consideration for issuing an RFP.

The next biggest driver of bank RFP issuance during the 18-month period has been an increase in demand for capital. However, the Greenwich Market Pulse results suggest that corporate demand for capital could be slipping because of new worries about the strength of the economic recovery, especially among small businesses. Of the relative handful of small businesses that issued RFPs for new banking partners in the first half of 2009, only 21 percent attributed the move to an increased demand for capital. As the pace of RFP issuance picked up last year, so did the share of small businesses reporting that an increasing need for capital determined their decision to issue an RFP Half of small businesses issuing RFPs in the second half of 2009 reported a growing need for capital as the reason. In the...