Businesses go bank shopping to reduce risk

UK enterprises have begun to compare business bank accounts in an effort to reduce their risks in relying on any one particular bank that may be subject to failure, a new survey has found recently.

According to findings released by Continental Research, one out of every seven small and medium-sized businesses have recently decided to increase the number of banks they routinely use over the past three years in order to reduce risk or negotiate better terms on business loans.  The survey includes data from over 500 SMEs.

This practise, referred to as “multi-banking,” has been much more prevalent amongst larger companies and corporations, but this study marks how the phenomenon has been growing amongst small and medium-size businesses; most SMEs have traditionally preferred to conduct their business exclusively with one bank as opposed to multiple.

Commissioned by the Corporate Banking branch of Santander Bank, the survey discovered that now one third of businesses regularly utilised the services of multiple banks, and over 50 per cent of those businesses had chosen to do so in order to minimise any risk that one of their banks might fail.

One such business that has recently diversified their banking has been BrewDog, a Scottish-based microbrewer.  James Watt, co-founder of the brewery, commented that he was forced into working with more than one bank when the company’s primary bank refused to negotiate with him in regards to financing equipment BrewDog needed in order to fulfill an order from Tesco.

Watt described the experience of asking his primary bank for £150,000 in funding in order to purchase new tanks and a new bottling machine as humiliating, claiming that BrewDog was laughed out of the branch.  Instead, he approached a different bank in order to meet his company’s needs.  Watt concluded that BrewDog now regularly utilises four different banks in order to deliver on large contracts.

Santander Corporate Banking’s head Steve Pateman commented on the survey’s findings, saying that while it has been traditional for any given business to have one banking partner which handled deposits and loans, there is evidence that these roles have become more fragmentary as the level of customer service of a multitude of banks has lost flexibility due to the economic downturn.

© 2021 All rights reserved. Reproduction in whole or in part without permission is prohibited. See our copyright notice.

Tags: , ,