The Relationship between U.K. Banks and Their Small Business Customers.

Abstract

Much emphasis is placed upon the benefits to both parties of a 'good' relationship between banks and their small business customers. Having explained the significance of SMEs in the U.K. Economy, the papers goes on to consider, briefly, some of the arguments which underpin the rationale for these relationships. The roles of information and communication are discussed and the poor coordination between banks, SMEs and their accountants is highlighted. Evidence from over 6, 000 small businesses in response to the Forum of Private Business survey in 1994 is then presented. This demonstrates the strong positive association between more participative relationships and more positive perceptions of their banks by firms. Finally it is suggested that a virtuous circle of information and communication could be established if the parties cooperate in a systematic process of risk assessment. Copyright 1997 by Kluwer Academic Publishers