In order to continue their activities, SME segment companies have to work with financial institutions for many reasons, especially lack of equity.
The most important factor in determining the number of banks to receive service is your work size. It is necessary to determine your needs and clearly determine which bank and which products you will work with.
Whether the number of banks you work with is few or many, both alternatives are risk factors for SMEs.
Although working with fewer banks strengthens the relationship between the bank and the company;
- Restricts mobility,
- Eliminates price competition,
- Your company's demand and the bank's corporate policy may not always coincide. Although banks have more or less the same products, the products that whet the risk appetite of each bank are different.
In a negative situation, the process of searching for an alternative bank may take a long time, and unfortunately, it is the bank side that says I have the power now.
Because the fewer your alternatives, the more your need will increase.
Although working with many banks seems positive in terms of distributing the risk;
You cannot position your company at the point you want before the banks because you cannot be fully sufficient for any bank.
The biggest risk of working with many banks is the negativities experienced due to non-prosecution. If you do not have a good follow-up system, the slightest delay that you do not care about may force you to make explanations to all banks.
Each bank will want to sell its own product and even if you do not need it, you will accept to use these products in order not to damage your relations with the bank and increase your costs.
The best example of this is BES. Each company owner has min. 3 PPS from different banks.
Since each bank will want to make profit from you in such a disorganised bank portfolio, if you cannot reach the expected profit figure, you will be considered as an inefficient customer.
In order to continue their activities, SME segment firms have to work with financial institutions for many reasons, primarily lack of equity.