Bank Turmoil Inspires Major Small Biz Shift To Local Credit Unions & Exacerbates Economic Fears

POLL TRENDS | DATA INSIGHTS | CREDIT UNION SURGE -- Boston, MA, March 31, 2023: Results of just-released Alignable polls show that small business owners concerned with banking instability are leaving their national banks behind and going hyper-local by embracing their hometown credit unions. In fact, the Silicon Valley Bank (SVB) and Signature Bank failures, along with other financial woes -- have elevated economic anxiety among small businesses to a new 2023 high.

Alignable's Small Business Banking Poll, conducted among 2,711 randomly selected small business owners from 3/17/23 to 3/30/23, reveals that 17% of U.S.-based SMB owners have already moved their funds out of the accounts they had prior to the collapse of SVB and Signature Bank. 

And 10% of their Canadian counterparts have done the same, showing how banking issues in the U.S. have been interpreted as a sign for some Canadians, too.

Beyond those findings, small business owners are flocking to their local credit unions as the No. 1 "new" option to help protect their money. This poll showed a massive surge in credit union use among SMBs -- up 65% over the period just prior to the banking upheaval -- leaving their large, national banks behind. 

Those polled reported more growth in credit union accounts than any other institution, as the use of major national banks, regional banks, and even local banks declined significantly. 

Related Poll: Overall Economic Anxiety On The Rise 

At the same time, Alignable's Recessionary Trends Survey, conducted from 3/2/23 to 3/3o/23 among 3,828 small business owners, shows that fears of a recession have increased amid the current banking turmoil. These worries are also attributable to cumulative inflationary pressures, and rising interest rates. 

In February, 55% of those polled thought a recession would occur in 2023, and 27% of that group said it was already here. 

But now in March, that overall number has jumped five percentage points to 60%, while more than half of this month's group (33%) insists we're already in a recession. 

More Details: Where's Main Street Moving Its Money?

Amid this atmosphere of increased economic uncertainty, here are more specifics around the entrepreneurs who've already shifted their funds in an attempt to provide greater security for their businesses.

As you can see, the following chart shows where their money was prior to the SVB and Signature Bank closures, and then now, as banking issues persist. 

While major national banks still have a slight, one percentage point advantage over credit unions as the place where small businesses are keeping their money right this minute, the surge in movement toward credit unions and away from many other financial options, is the most striking element of this poll.

In fact, before the bank failures, twice as many of the small business owners taking this survey said they had their money in national banks (34%) vs. credit unions (17%).

But now that 17-percentage-point 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. 

We'll be watching this trend closely. If it continues, credit unions could easily end up being the No. 1 spot for small businesses to keep their money as they try to weather the current economic storm. 

Direct Quotes Highlight The Reasons Why 

A few survey respondents who shifted their money to hometown credit unions shared even more of their thinking via several quotes, including the following:

"I'm quite nervous about other, very possible big bank closures."

"Shifted from a major national bank, because I feel the service is better at my local credit union and it's member-owned."

"I feel my local credit union is more personal, more secure. And I suffered from a lack of client relations at my old, big bank."

"I don't trust the banks. I trust my local credit union members and my community more."

We also interviewed one of the Alignable network's best-known financial advisors, Founder/Managing Partner of Beckett Financial Group Jason "JB" Beckett about these findings. He reinforced much of what poll respondents told us.

"I interact with a number of financial institutions, and a number of people prefer credit unions, because they're member-owned, and others because of their community connection," said Beckett. "We see many clients utilize credit unions for loans. Some also feel they can get better service with a smaller hometown entity like a credit union than a national bank."

Online Options Also Show A Bump

Beyond the 65% surge in the popularity of credit unions, our findings also demonstrate that some small business owners moved their money to online banking options: 4% had online bank accounts prior to the banking crisis and now that figure is up to 6%, denoting a two-percentage point jump (or an increase of 50%). 

While this trend will be interesting to watch, the overall numbers for online banks are dwarfed by what's happening with credit unions presently, as well as the declines witnessed among other banking institutions.

As the chart above also reveals:

• there was a 13% dip in small business owners sticking with their regional banks,
• a 17% drop in those continuing their relationship with national banks, and 
• a 21% decline in SMB owners keeping their money in a local bank (vs. a local credit union). 

Veterans Come Out In Front -- TWICE

Looking at this data from a demographic perspective, it's interesting to note that our groups not only showed varying degrees of urgency in moving their money, but also a wide range of devotion to credit unions. (However, all of them did increase their use of credit unions as a new home for their cash).

That said, across the board in our demographic research, veterans topped the list.

Let's start with the statistics related to moving funds:

• 22% of SMB owners who are veterans shifted their money after the banking crisis, and that was five percentage points higher than the national U.S. average
• 20% of minority-owned businesses transferred funds
• 17% of nonminority-owned businesses also moved their money
• But only 14% of those owned by women shifted their savings.

In terms of using credit unions, here's how the data divides: 

As this chart shows, 27% of veterans surveyed used credit unions before the banking crisis, but that number shot up by 23 percentage points -- or by an incredible 85%, after the major banking turmoil started. 

Women-owned businesses are next in line in terms of those who now have their funds in a local credit union. That percentage is now 34%, up 16 percentage points from 18%, or the equivalent of a monumental 89%. 

Nonminority-owned businesses mirrored the national trend with 28% now having funds in credit unions, up 11 percentage points from 17% (representing a surge of 65%). 

And while minority business owners had the second highest percentage in terms of who used credit unions before SVB and Signature Bank collapsed, their decision to house their money in credit unions only increased by two percentage points or 10%. 

The data on different industries also shows a great deal of diversity in terms of which sectors are most alarmed by the bank collapses and which ones appear to be taking them in stride. 

What's The Industry Landscape Look Like?

Starting with the sectors that showed the most urgency to move funds, here's what our research found. 

Approximately one-third of the home inspectors who took our survey moved their money quickly, with a few other sectors close behind:

• 28% in automotive
• 27% in the beauty & travel/lodging industries
• 25% in the legal profession
• 24% in marketing and advertising
• 21% in retail
• 20% in transportation and retail
• 18% in real estate
• 15% in construction
• 13% in finance
• 11% in the restaurant sector, and 
• 8% in the medical field.

The fact that only 13% in finance shifted their funds was one of the more striking findings here, perhaps indicating that the "money people" were not as alarmed by the bank failures as others. In fact, some comments from financial experts taking the poll squarely identified SVP and Signature Bank as two institutions that were, in their words, "very poorly managed." 

Which Sectors Say Credit Unions Are No. 1?

Now looking at only the SMB industries where parking money at credit unions was the top overall choice, here's what we uncovered:

Many of these numbers indicate massive support for credit unions, both before the banking crisis, and especially afterwards. 

• Gyms/Personal Trainers top the list in terms of the percentage of those who now have their cash in a local credit union: 76%. And that represented a surge of 67%. 
• Almost at the same level, 75% of travel/lodging small business professionals now have their cash in credit unions, up 50%.
• 67% of the beauty salon and barber shop owners polled favor credit unions, up 103% from the time before the bank crisis.
• Those in the automotive industry also saw a major jump, as 60% in that sector are now keeping their money at credit unions.
• And those in retail had the largest increase when it comes to transferring money to credit unions, up 32 percentage points from 11% prior to banking problems to 43% afterward (or the equivalent of a 290% increase). 

Want More Data? Let Us Know

To see more specific data from Alignable's Small Business Banking Poll -- covering additional industries, demographic groups, and more -- please contact me at chuck@alignable.com.

To review past poll results, go to the Alignable Research Center.

About The Alignable Research Center

Alignable is the largest online referral network for small businesses with 8 million+ members across North America.

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.