How to Grow Deposits from Small Businesses

What do you think of when you hear “deposit growth”? For many, the immediate reaction is to think ‘consumer savings’, which wouldn’t be a big surprise. After all, many banks and credit unions have expanded efforts to promote consumer savings and checking accounts to new customers. Not to mention, evaluate current customers and pursue strategies to encourage retention and increase deposits.

But consumers are not the only place to look for deposits. Small businesses offer significant deposit growth potential too.

The small business market is ripe for deposit services 

Small businesses have many deposit management needs. Small businesses need to: 

• pay vendors and employees

• purchase supplies 

• receive payments from customers

• and earn interest on money reserves that are intended for future use.

Deposit opportunity from small businesses is significant. Especially if you already have a lending relationship.

• Small businesses that have a lending relationship with a bank of 36 months or more have deposit balances more than double that of institutions without the lending connection.1

• At the 36-month mark, small businesses on average exhibit deposit balances that are three times those of consumer accounts.1

The size of the small business market is considerable. There are over 33 million businesses with 1 to 500 employees.2 Plus there are tons of new businesses popping up every day. In fact, there were over 5.5 million new business applications in 2023 - a new record.3

How can banks and credit unions identify and target small businesses for deposit growth opportunities? How can they better connect with small businesses in their local markets and beyond? The answer is by using the right data.

Here are four ideas to expand your small business relationships and bring in more deposits.

Target small businesses with high transactions

Small businesses need to make smart use of marketing dollars. That means reaching companies that are actively conducting business. We all know the friend that suddenly becomes an ‘entrepreneur’ and incorporates a new business. But maybe they are not actually selling anything yet. That’s not the small business you want to target. 

Instead, you can identify small businesses that have high cash flows, numerous credit card transactions, and high growth. These small businesses are more likely to hold higher deposit levels and need banking services. You can combine these data points with detailed firmographic data. Then you can better reach the right small businesses to promote your deposit and other business banking services.

Identify consumers that are also business owners

Do you know which of your consumer banking customers are also small business owners? This audience - your current customers that are also business owners - presents an opportunity to expand existing relationships. You are already familiar with your customers’ traditional banking needs. It’s a natural extension of the customer relationship to tell them about your business banking services. 

One large national bank used our consumer to business owner linking service to analyze its 118 million consumer accounts. It discovered that 5.2 million of those consumers were directly associated with a business as a principal or owner. The bank already had business relationships with 1.4 million of those consumers. That left over 3.7 million as potential prospects for the bank to market to for new business banking and deposit relationships.

Pursue small businesses with significant assets

With so many small business accounts, it can be difficult to recognize which offer significant deposit potential. With insight on assets invested by small businesses, you can differentiate those small businesses that are more likely to offer high deposits for your firm. For example, one small business might be estimated to have over $18 million in invested assets. Whereas another might be estimated to have $100,000 in invested assets. The first business is a better investment for your marketing dollars.

You can also gain insight on whether a small business is designated as residential (ie. SOHO = small office, home office) or non-residential. This can help you tailor your marketing communications to promote varying services. 

Be the first to reach new small businesses in your market

As we mentioned, millions of new small businesses are launched each year. If you can be the first to reach these new companies, you could be more likely to win their business and bring in new deposits. Banks and credit unions can take advantage of weekly updates that detail newly formed businesses. This can help you quickly identify new business start-ups located within your target markets. Then you can gain an early advantage to promote your business banking services and capture new deposits.

What’s your deposit growth plan?

Deposit growth is a priority and a challenge. You need to keep the deposits you have, get more deposits from your current customers, and gather new deposits. While consumer deposits are often the focus, the small business market offers a huge - and often untapped - opportunity to capture deposits. Be sure to work with the right partner that offers strategies that help you grow your deposits from both consumers and small businesses. 
 

1. Curinos, Sept. 21, 2023.

2. The State of Small Business Now, U.S. Chamber of Commerce, April 10, 2023.

3. Economic Innovation Group, Jan. 12, 2024.