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Financial Services for Small Businesses in the U.S., 3rd Edition

  • February 2015
  • -
  • Packaged Facts
  • -
  • 163 pages

Financial Services for Small Businesses in the U.S., 3rd Edition

Having lagged the post-recession recovery curve of larger companies, small businesses continue to build momentum—and financial institutions large and small are broadening their arsenal of products and services accordingly. Packaged Facts estimates the value of purchases made with small business credit cards alone at $505 billion, and we expect 11.5% growth in 2015. So far, small business loans have not caught up, leaving ample room for innovation. But it’s also about finding the right bank: our analysis reveals significant differences in large banks’ ratios of small business and microloans to loans outstanding. And it’s also about understanding small business participants—owners, managers, the self-employed—whose banking, securities, and business credit card usage we trend to lend insight into their bankability.

Financial Services for Small Businesses in the U.S., 3rd Edition assists in understanding these and other trends shaping the market for small business financial services. The report does the following:

Assesses the small business financial services strategies of American Express, Bank of America, Capital One, Citibank, JPMorgan Chase, MasterCard, U.S. Bank, Visa and Wells Fargo, with an emphasis on their respective small business card and small business lending programs and related initiatives. Analysis includes small business credit card purchase value estimates; and, for Visa and MasterCard, debit card purchase value estimates.
Assesses the small business financial services market, by identifying and trending small business participants (owners, self-employed, etc.); employment and firm size; business challenges; and use of credit (trade credit, loans, and credit cards).
Trends small business owner, small business management & self-employed worker demographics, with a focus on household income, securities and residential ownership trends.
Trends small business owner banking relationships and products used by institution, as well as investment trends and banking and credit card products used, through 2014.
Identifies the degree small business stakeholders are involved in purchasing decisions & the purchase decision process.
Provides small business expenditure market sizing estimates and a detailed market size and forecast for small business credit/charge and debit cards by card network.
Trends consumer and business credit card usage and behavior through 2014 among 1) all adults employed by small businesses, 2) small business owners and managers, and 3) self-employed individuals working for small businesses. Metrics include card usage and active usage, and we emphasize demographic analysis of respondent HH income, company size and securities owned.
Analyzes the small business cards programs of the top 100 U.S. financial institutions by assets.
Assesses the degree personal cardholders use business cards and vice versa, with an estimate for amount of personal card spend done on business cards.
Trends and ranks major banks by total amount of small business loans and microloans and share of total loans outstanding (including nonfarm non-residential loans and commercial and industrial loans) through 2014.
Trends and ranks the top SBA lenders by total loan volume and by share of total loans outstanding through 2014.
Trends small business loan demand and credit standards; and financing and funding choices through 2014.

Table Of Contents

Financial Services for Small Businesses in the U.S., 3rd Edition
Chapter 1: Executive Summary
Report Scope
Report Summary
The market for small business financial services
The target market
Small business spend opportunity
Small business challenges
Trade credit still rules
But credit cards supplant business earnings as top source of financing
Secret to small business card success
Small business card market size and forecast
Small business credit cards enjoy strong financial institution support
Business loan trends
ApplePay: Does American Express have the advantage?
Small business demographics, banking relationships and bankability
Sizing market participants
HH income, securities ownership and home ownership trends: 2008-2014
Banks attracting small business participants
Bank credit card relationships
Purchasing decisions and the purchase decision process
Small business participant banking and investment trends
Investment trends suggest recession scars and product opportunity
The competitive arena
American Express
Bank of America
Capital One Financial
Citibank
JPMorgan Chase
MasterCard
U.S. Bank
Visa
Wells Fargo
Small business lending trends
Loan demand picking up but small firms lag
Commercial bank small business lending trends by bank asset size and loan size
Community Reinvestment Act small business loan trends
Small Business Administration lending trends
Small business credit card usage trends
Small business credit card recovery lags consumer recovery
Small business cardholder demographics
Conversion opportunity
Chapter 2: The Market for Small Business Financial Services
The target market
Small business cards
Business loan trends
ApplePay and American Express
The U.S. small business universe
Firms versus establishments; employer versus non-employer firms
Self-employment
More than twenty eight million small businesses
Post-recession growth tilts to non-employers
Table 2-1: Number of Employer and Non-Employer Firms and Small and Large Business Firms, 2007-2012
Small firm and small firm employment recovery comes up short
Smallest firms have yet to recover from recession declines
Table 2-2: Distribution of Private Sector Firms by Size Class, Population and Percentage Share, 2007-2014
Employment share among smallest firms declines
Graph 2-3: Distribution of Private Sector Employment by Firm Size Class, Population and Percentage Share, 2007-2014
Self-employment ticks upward, with trend toward incorporation
Graph 2-1: Self-Employed Adults, Incorporated and Unincorporated, 2007-2014
Small business by vertical
Table 2-4: U.S. Small Business Employer Firms, Establishments, Employment and Payroll, by Industry: Number and Share, 2012
Small business spend opportunity
The Visa Commercial Consumption Expenditure Index
Before the recession
Knee-deep in the recession
Post-recession
The McKinsey Payments Map
Spend categories
Small business challenges
Biggest problem? Taxes and government.
Graph 2-2: Single Most Important Problem Facing Small Business: 2008-2015
Credit use by small businesses
Increasing access to capital
But more than a quarter still shut out
Credit cards supplant business earnings as top source of financing
Table 2-5: Types of Financing Used by Small Businesses in Past 12 Months, 2012-2014
Trade credit
Table 2-6: Small Business Customer Experiences
Small business cards
Small business credit card market size and forecast
Lots of extended credit; lots of spend
More than $500 billion in purchase value
Higher rates of growth to follow
Table 2-7: U.S. Small Business Card Purchase Value and Share of Total Value, 2012-2014
Visa, MasterCard and American Express each grow share in highly competitive environment
Table 2-8: U.S. Small Business Card Purchase Value: Total, Credit/Charge and Debit/Prepaid, by Card Network 2012-2014
Small business credit cards enjoy strong financial institution support
Visa has a wide lead
Table 2-9: Small Business Credit Card Programs Offered among Top 100 Financial Institutions,by Number of Cards, Number of Bank Programs and Network Brand, 2015
Cobrand and affinity cards concentrated among major credit card issuing players
Table 2-10: Small Business Credit Cards Offered among Top 100 Financial Institutions, by Number of Cards; Own Brand, Co-Brand and Affinity; and Network Brand, 2015
It doesn’t take a banking behemoth to offer a strong small business card program
Table 2-11: Small Business Credit Card Programs Offered among Top 100 Financial Institutions,by Institution, Number of Cards and Network Brand, 2015
Business loans
Still a week spot
Loosening loan standards
But small business loans have yet to catch up
And issues with demand persist, especially among smallest firms
ApplePay: can it tap small business?
Advantage American Express?
Table 2-12: iPhone Ownership, All Adults, Small Business Owners, Managers and Self-Employed, 2014
Table 2-13: Small Business Owner/Manager iPhone Users vs. Non-Users: Have Credit Card, Branded Credit Card, and Business Card by Brand, 2014
Chapter 3: Small Business Demographics, Banking Relationships and Bankability
Owners, management and self-employed workers
Defining our terms
Sizing the population
Table 3-1: Small Business Owners, Small Business Managers and Small Business Self-Employed:2014 Population and Percent of Population
Trends over time
Graph 3-1: Small Business Owners, Small Business Managers and Small Business Self-Employed:2009-2014
Self-employed wear owner and manager hats
Table 3-2: Small Business Owners, Small Business Managers and Small Business Self-Employed:Population Overlap, 2014
Small business composition, by company size
Graph 3-2: Small Business Owner, Management and Self-Employed Population Share, by Size of Company: 2014
Small business demographic analysis
Small business participants as mass affluent/affluent customer acquisition targets
Share of women lags population average but is substantial
Graph 3-3: All Adults, Small Business Owners and Small Business Self-Employed Share of Population,by Selected Demographics, 2014
HH income trends
Graph 3-4: All Adults, Small Business Owners and Small Business Self-Employed, By HH Income Bracket,2008-2014
Securities ownership trends
Graph 3-5: Securities Ownership Trends Among All Adults, Small Business Owners and Self-Employed,by Amount of Securities Owned, 2008-2014
Residence ownership trends
Home ownership influences entrepreneurship
Small business owners more likely to be home owners
Residence value declines
Graph 3-6: Home Ownership Trends Among All Adults, Small Business Owners and Self-Employed,by Value/Ownership of Residence, 2008-2014
Banking relationships
Small business owner/managers and self-employed call Bank of America home
Wells Fargo and Chase make up ground
Table 3-3: Financial Institution Used as Primary Bank by Small Business Owner/Managers and Self-Employed, 2014
Credit card relationships
Chase on top
Top four each perform well
Table 3-4: Financial Institution Issuing Credit Card, by Small Business Owner/Managers and Self-Employed,2014
Business purchasing decisions
Small business purchasing decisions; small business purchasing cards?
Table 3-5: Percentage of Small Business Owners, Managers and Self-Employed Involved in $5,000+
Business Purchase Decision in Past 12 Months, 2014
The business purchase decision process
Table 3-6: Small Business Owners, Managers and Self-Employed Involved in $5,000+ Business Purchase
Decision in Past 12 Months, Manner of Involvement, 2014
Small business banking and investment trends
Small business bank accounts and deposits provide upsell/cross-sell opportunity
Savings account growth and checking declines suggest liquidity issues
Table 3-7: Percentage of Small Business Owners, Management and Self-Employed Having Savings,Non-Interest Checking and Interest Checking, 2009 vs. 2014
Investment trends suggest recession scars and product opportunity
Solo 401K opportunity
Table 3-8: Percentage of Small Business Owners, Management and Self-Employed Having 401K,Mutual Funds and Keogh/SEPP-IRA/Pensions, 2009 vs. 2014
Small business credit cards: lots of chips left on the table
Table 3-9: Percentage of Small Business Owners, Management and Self-Employed Having Credit Cards,Branded Credit Cards and Business Credit Cards, 2009 vs. 2014
Chapter 4: The Competitive Arena
American Express
Value proposition
Special services and programs abound
Commercial card customer segmentation
OPEN for competition
Membership Rewards
Card developments and enhancements
Bolstering the Plum Card
Delta gets a re-up
Movement to category-based rewards tiers
SimplyCash gets a reboot
Business Gold follows
Chinks in the armor
American Express Platinum’s airport lounge problem
Costco contract termination
Table 4-1: American Express Small Business Own-Brand and Co-brand Credit Card Programs: 2015
Product and service developments and enhancements
OPEN Forum
Merchant financing
ReceiptMatch
OptBlue
Marketing initiatives
Small Business Saturday a growing success
The American Express small business card user
Table 4-2: American Express Small Business Credit Card Use: Any Credit Card vs. Business Credit Card, by Small Business Participant Category, 2014
Table 4-3: American Express Small Business Owner/Manager and Self-Employed Credit Card Use: Any Credit Card vs. Business Credit Card, by HH Income and Securities Owned, 2014
Table 4-4: Small Business Participants: All vs. American Express Business Card Users, by Company Size,HH Income, Securities Ownership and Business Purchasing Amount, 2014
American Express small business growth trends
Table 4-5: American Express U.S. Billed Business, OPEN Billed Business and Percent Charge, 2010-2014
Bank of America
Small business milestones
Table 4-6: Bank of America Small Business Own-Brand, Co-brand and Affinity Credit Card Programs: 2015
Small business card portfolio
Bank of America Consumer and Small Business growth trends
Table 4-7: Bank of America Consumer and Small Business Loan Metrics, Debit and Credit Purchase Value,Locations and ATMs, 2012-2014
Capital One
Getting to know you while you get to know us
A strong own-brand small business card platform
Bumping up rewards
Table 4-8: Capital One Spark Business Cards: Rewards Comparison, 2013-2015
Building a cobrand portfolio
BuyPower Business
TrueEarnings next?
Table 4-9: Capital One Small Business Own-Brand and Co-brand Credit Card Programs: 2015
Non-card small business products and services
Capital One small business card growth trends
Table 4-10: Capital One Financial Corporation: U.S. Credit Card Purchase Value and Loans Outstanding,2011-2014
Table 4-11: Capital One Financial Corporation: U.S. Credit Card Purchase Value and Loans Outstanding: Consumer vs. Small Business, 2014
Citibank
ThankYou program
A light small business card footprint
Table 4-12: Citibank Small Business Own-Brand and Co-brand Credit Card Programs: 2015
AAdvantage card a small business spend gem?
Table 4-13: Citibank Citi-Branded and Retail Card Purchase Value and Loans Outstanding and 2014 Small Business Share, 2012-2014
JPMorgan Chase
Small business leadership
Small business cards gaining traction
Table 4-14: JPMorgan Chase Small Business Own-Brand and Co-brand Credit Card Programs, 2015
Enhancing rewards
Table 4-15: Ink Plus vs. Ink Cash, 2015
Launching and enhancing small business tools—and small business image
Jot
Small Business Forward
Chase Platinum Business
The Mission? Connecting to Main Street
Small business lending
Small business credit card growth trends
Table 4-16: JPMorgan Chase Credit Card Volume, Loans Outstanding and Related Metrics: Consumer vs. Small Business, 2012-2014
MasterCard
Small business growth objectives
An integrated approach
Business card programs in a nutshell
Bank relationships
Table 4-17: Small Business Credit Card Programs Offered among Top 100 Financial Institutions, by Number of Cards, Number of Bank Programs and Network Brand, 2015
Table 4-18: MasterCard Small Business Credit/Charge Card Cards, by Major Issuer and Rewards Type:2015
The MasterCard small business card user
Table 4-19: MasterCard Small Business Credit Card Use: Any Credit Card vs. Business Credit Card, by Small Business Participant Category, 2014
Table 4-20: MasterCard Small Business Owner/Manager and Self-Employed Credit Card Use: Any Credit Card vs. Business Credit Card, by HH Income and Securities Owned, 2014
Table 4-21: Small Business Participants: All vs. MasterCard Business Card Users, by Company Size, HH Income, Securities Ownership and Business Purchasing Amount, 2014
Small business tools and resources
MasterCard Easy Savings
Online Reporting Solutions
MasterCard PriceAssure
Corporate spending controls to increase automation and delegate card spending
Small business relationships
U.S. small business card growth trends
Table 4-22: MasterCard U.S. Total and Small Business Card Value, 2012-2014
U.S. Bank
New cards give small business the “Edge�
Table 4-23: U.S. Bank Small Business Own-Brand and Co-brand Credit Card Programs, 2015
Small business tools
Visa Inc.
Commercial payment solutions
Small business solutions
The Visa small business card user
Table 4-24: Visa Small Business Credit Card Use: Any Credit Card vs. Business Credit Card, by Small Business Participant Category, 2014
Table 4-25: Visa Small Business Owner/Manager and Self-Employed Credit Card Use: Any Credit Card vs. Business Credit Card, by HH Income and Securities Owned, 2014
Table 4-26: Small Business Participants: All vs. Visa Business Card Users, by Company Size, HH Income,Securities Ownership and Business Purchasing Amount, 2014
Small business cards
Bank relationships
Table 4-27: Small Business Credit Card Programs Offered among Top 100 Financial Institutions,by Number of Cards, Number of Bank Programs and Network Brand, 2015
Table 4-28: Visa Small Business Credit/Charge Card Cards, by Issuer and Rewards Type, Top Institutions by Assets: 2015
Small business tools and resources
Visa SavingsEdge
VIS Select
Visa Payment Controls
Visa Small Business
Microfinance
U.S. small business card growth trends
Table 4-29: Visa U.S. Total and Small Business Card Value, 2012-2014
Wells Fargo
Small business lending powerhouse
Loans and lines of credit
Table 4-30: Wells Fargo Business Loans and Lines of Credit, 2015
Small business cards and related products
Chapter 5: Small Business Lending Trends
Loan term and demand trends
Small business challenges and choice of funding
Microloan trends
A look at the top 35 banks by assets and loans outstanding: amount and share analysis
CRA, SBA and small business loan trending
Survey data
Senior Loan Officer Opinion Survey
Near-term analysis
Longer-term analysis
Graph 5-1: Net Percentage of Domestic Banks Tightening Standards: Large/Middle Market and Small Firm CandI Loans and Credit Card Loans, 2005-2014
Graph 5-2: Net Percentage of Domestic Banks Reporting Stronger Loan Demand: Large/Middle Market and Small Firm CandI Loans and Credit Card Loans, 2005-2014
Survey of Terms of Business Lending
Smaller banks = higher interest rates; smaller loans
Table 5-1: Commercial and Industrial Loans Made by Large and Small Domestic Banks: Summary Analysis,2014
Challenges facing small business
Graph 5-3: Top Small Business Challenge, 2014
Seeking financing related to small business size
Graph 5-4: Percent of Small Businesses Applying for Financing, by Small Business Revenue Size, 2014
Choice of funding
Graph 5-5: Primary Type of Funding Used by Small Businesses, 2013
Choice of financing differs by small business size
Graph 5-6: Type of Financing Applied For, by Small Business Revenue Grouping, 2014
Low financing approval rates for smallest businesses
But smaller banks more likely to approve small business loan application
Graph 5-7: Financing Application Rate and Approval Rate, by Small Business Revenue Grouping Lender Type, 2014
FDIC-insured commercial bank small business lending trends
Introduction
Terms to set the stage
Banking behemoths continue to grow asset and deposit share
Small business microloans decline across the board
Table 5-2: Commercial Bank Assets, Deposits, C and I Loans, Small Business Loans, and On a percentage of assets basis, smaller banks remain small business loan leaders
But by percentage of assets, all bank segments down
Table 5-3: Small Business Loans, Percent of Assets, by Commercial Bank Asset Size, 2010 vs. 2014
Small business loan volume in context of bank size: 2014 data analysis
Introduction
Asset leadership
Loans outstanding leadership
Small business loan share
Microloan share
Table 5-4: Top 35 U.S. Banks by Total Assets: Assets, Deposits, Domestic Deposits and Loans Outstanding,2014
Table 5-5: Top 35 U.S. Banks by Total Loans Outstanding: Nonfarm Nonresidential Loans and Commercial/Industrial Loans of Table 5-6: Top 35 U.S. Banks by Total Loans Outstanding: Percent Community Reinvestment Act small business loan trends
CRA loans and loan values remain far below pre-recession levels
Post-recession loan value and loan volume rise moderately
Table 5-7: Community Reinvestment Act Business Originations and Purchases of Small Loans to Businesses, By Size of Loan, Average Loan Size and Small Business Recipient Share, 2010-2014
Small Business Administration Programs
Post-recession trends
Increased SBA lending
Decreased fees
Larger loan sizes
Increased private lender commitments
SBA 7(a) Loan Program
$19.2 billion in 7(a) loans
Table 5-8: SBA 7(a) and 504 Gross Business Loan Approval, Loan Number and Average Volume, 2014
2009-2014 7(a) loan volume jumps dramatically
Table 5-9: SBA 7(a) Gross Business Loan Approval, Loan Number and Average Volume, Startups vs. Existing Businesses, 2009-2014
Share of loans to minorities increases; those to women, rural areas and veterans decline
2014 brings loan volume increases to women-owned businesses
Table 5-10: SBA 7(a) Gross Business Loan Approval, Loan Number and Average Volume, Minority, Rural, Women, Veterans and Low-Value Loans, 2009-2014
Top SBA 7(a) bank lenders
Table 5-11: Top 25 U.S. Banks by SBA Loan Volume, Loan Number and Average Loan Size, 2014
Volume-to-total loan leaders
Table 5-12: Top 25 U.S. Banks by SBA Loan Volume Approved, SBA to Total Loans, Small Business to Total Loans, and Chapter 6: Small Business Credit Card Usage Trends
Small business credit card recovery lags consumer recovery
Small business cardholder demographics
Business versus personal use
Business expenses
Credit card usage trends among small business employees
Table 6-1: Percentage Using Credit Cards, All Adults vs. Small Business Employed, 2014
Personal and business credit/charge card use and usage overlap
More than 22 million small business card users
Business cards complement the wallet
But significant usage overlap on both sides
Table 6-2: Small Business Participants: Personal Credit/Charge Use and Percent Used for Business; Business Credit/Charge Use and Percent Used for Personal, 2014
Table 6-3: Small Business Credit/Charge Use: Personal Cards and Business Cards; Personal
Purchases and Business Purchases, by HH Income, 2014
Table 6-4: Small Business Credit/Charge Use: Personal Cards and Business Cards; Personal
Purchases and Business Purchases, by Company Size, 2014
Small business credit/charge card users, by demographic
Table 6-5: Small Business Participant Credit Card Users: Percent Using Business/Company
Credit/Charge Card, by Demographic, 2014
A case for employee cards
Table 6-6: Small Business Credit/Charge Cards: Percent Applied for Personally vs. Provided by Employer, 2014
Business purchase share of personal card spend
Table 6-7: Business Purchase Share of Personal Card Spend, by Cardholder HH Income and Small Business Company Size, 2014
Table 6-8: Small Business Credit/Charge Card Use, by Business Expense Category, 2014
Credit card usage trends among small business owners, managers and self-employed
Personal and business credit/charge card use trends: 2009-2014
Table 6-9: Percentage of Small Business Owners, Managers and Self-Employed Having Credit Cards, Branded Credit Cards and Business Credit Cards, 2009 vs. 2014
Market remains untapped
Table 6-10: Percentage of Small Business Owners, Managers and Self-Employed Having Business Credit Cards, Percent and Population, 2014
Personal and business credit/charge card use trends, by brand: 2009-2014
Table 6-11: Credit Card Use, Branded Credit Card Use, Branded Credit Card Use Past 30 Days,Credit Card Use Most: Any Card vs. Business Card, by Card Brand, 2010-2014
Card brand preferences among small business participants
Table 6-12: Credit Card Use, Branded Credit Card Use, Branded Credit Card Use Past 30 Days,Credit Card Use Most: Any Card vs. Business Card, by Small Business Participant Category, 2014
Demographic profile: Small business credit card users, by card brand
Small business owner/managers
Table 6-13: Small Business Owner/Manager Credit Card Use and Business Credit Card Use, by Card Brand: by HH Income and Securities Owned, 2014
Small business self-employed
Table 6-14: Small Business Self-Employed Credit Card Use and Business Credit Card Use, by Card Brand: by HH Income and Securities Owned, 2014
Small business participants: card users and non-users
Table 6-15: Small Business Card Non-Users and Users, by Type of Card, by Type of Card: Company Size, HH Income, Securities Ownership and Business Purchasing Amount, 2014
Table 6-16: Small Business Card Non-Users and Users, by Type of Card: Company Size, HH Income, Securities Ownership and Business Purchasing Amount, Indexed Use, 2014
Small business participant financial services attitudes by card presence and brand used
Table 6-17: Financial Services Attitudes: Small Business Card Non-Users and Users, by Type of Card, 2014
Table 6-18: Financial Services Attitudes: Small Business Card Non-Users and Users, by Type of Card, Indexed Agreement, 2014
Appendix
Methodology
Consumer survey methodology
Market size and forecast
Purchase value
Small business purchase value
Value not included
Other
Sources
Report table interpretation
Color coding
Indexing
Terms and definitions

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