Do Bankers Always Know Best?: A Comparison of Business Finance Strategies of Small Business Operators and Bank Loan Officers

In spite of the fact that small businesses produce more than $1.5 trillion in sales each year and have created most of the 34 million new jobs in the United States since 1970, indications are that they are receiving less than their share of attention and less than good advice from their bankers. A 1989 survey by the Small Business Development Center at Northeast Louisiana University provides evidence that both small business owners and bankers are deficient in their knowledge of basic business finance strategies, particularly during the start-up stage of business. On some questions in the survey the bankers scored lower than the small business people, making their advice as finance professionals somewhat suspect. As a result of the study, the following recommendations are made: (1) banks should establish a working relationship between bank officers and small business owner/managers, (2) large banks should establish a small business department, (3) both bankers and small business owners should become aware of university resources to assist small business, and (4) bankers should familiarize themselves with small business problems