Small Business Owners Turn to Local Credit Unions as Banking Turmoil Mounts

Credit unions seem to have gained popularity among small- and medium-sized business owners as an alternative to traditional banks due to their community-based structure and personalized service. A recent survey provides interesting data on the behavior of small- and medium-sized businesses before and after the failure of Silicon Valley Bank and Signature Bank. Here are the key findings of the poll.

Recent bank failures and other financial woes have caused increased economic anxiety among small business owners, according to the results of the Alignable Small Business Banking Poll conducted in March 2023. The poll shows that 17% of U.S.-based SMB owners have already moved their funds out of the accounts they had prior to the collapse of major banks, including the Silicon Valley Bank (SVB) and Signature Bank. Furthermore, many small- and medium-sized businesses are moving to their local credit unions as the preferred option to help protect their money.
Here are the key findings from the poll.

Small business owners are embracing their hometown credit unions as the most popular option to help protect their money. Alignable’s poll shows that credit union use among SMBs surged by 65% over the period just prior to the banking upheaval, leaving their large, national banks behind. Online banks saw a 50% increase but they are still the least-frequently financially institution used by small businesses.

Before the bank failures, twice as many of the small business owners surveyed said they had their money in national banks (34%) versus credit unions (17%). But now that difference has dwindled to just one percentage point with 28% of those polled saying their money is now with credit unions, an 11 percentage point increase since the banking failures occurred.

Veterans topped the list of small business owners who moved their funds after the banking crisis, with 22% of veteran-owned SMBs shifting their money, which was five percentage points higher than the national U.S. average. Women-owned businesses followed with 14% shifting their savings, while minority-owned businesses and non-minority-owned businesses saw 17% and 20% of SMBs moving their money, respectively.

Small business owners shared their thinking via several quotes, with some highlighting that they felt their local credit unions were more personal, more secure, and offered better service than their old, big banks. They also pointed out that they trust credit union members and their community more than banks.

It is interesting that only a small percentage (13%) of those in the finance industry moved their funds, suggesting that those in the financial sector may not be as concerned about bank failures as other industries. Some financial experts who took part in the survey commented that SVB and Signature Bank were “very poorly managed” institutions.

Retail businesses, gyms/personal trainers, travel/lodging SMBs, beauty salon and barber shop owners, and those in the automotive industries chose credit unions as the top place to store their money. As you can see below, they were also among the industries that were most likely to move their money to a credit union.

Alignable’s poll indicates that many small business owners are turning to local credit unions to protect their funds amid economic uncertainty. Credit unions have become the top choice for SMBs, with many citing personal service, security, and trust in the community as the reasons behind the shift.