Two for one: nowadays, it seems bank mergers are the norm. But what does that mean for small business?

Entrepreneur, July, 1998 by Cynthia E. Griffin

Among the fears driving these customers away: "Facelessness is par for the course when banks merge. You lose that personal contact," says Alice Magos, a small-business analyst at international business research and publishing firm CCH Inc. in Riverwoods, Illinois.

Then, of course, there are the horror stories of higher fees, reduced services and eliminated credit lines. Many entrepreneurs also wonder: Does this merger mean my access to capital will be curtailed or eliminated?

So far, this last fear is groundless. According to Jere Glover, chief counsel for the SBA Office of Advocacy, mergers don't seem to have affected the availability of capital. Financial institutions consultant Bert Ely of Ely & Co. Inc. in Alexandria, Virginia, attributes this to the fact that even the largest banks find small-business lending an increasingly competitive line of business.

If your bank cuts back on small-business financing, Ely points out that bankers who were casualties of mergers often open community financial institutions that court entrepreneurs by offering flexibility and personalized banking.

So what can you expect if your bank merges with another? According to the American Bankers Association, merged banks typically face intense competition from other financial institutions immediately after the joint venture is approved. They are also under increased scrutiny from regulators and tend to make substantial financial commitments to the new regions they move into.

"Both sides of a merger want to make the impact on customers as minimal as possible," says Robin Wantland, a regional executive with the Dallas office of Banc One. If there are changes, they will likely happen in the first four to six months, and they depend on the size and internal operations of each bank. If the merging banks are on the same computer system, there will probably be few changes. If they're on different systems, however, you may see price and product modifications.

The kind of merger taking place also impacts the degree of change, says Wantland. "If the merger is taking a bank into new markets," he says, "the chances of branches closing drop substantially."

Wantland says business customers can expect frequent communications about new products and prices. "When it's done correctly, a merger can work very well," he adds. "Customers have better access to products and technology, and it's convenient."

RELATED ARTICLE: MERGING POWER

The list of banks that have merged seems endless-Chemical and Chase; BankAmerica Corp. and NationsBank; Banc One and First Chicago, just to name a few. But what's driving these financial marriages? Is it greed? A need for power?

Technology is one of the major forces behind the mergers, says Robin Wantland, a regional executive with the Dallas office of Banc One. Many institutions see merging as the only way to pay for the high cost of technology and thus remain competitive. "The year 2000 is a big driver," Wantland says. "Some banks realize they can't afford to make the software changes."