Why Large Financial Institutions Aren’t Built For Small Businesses

Banking isn’t a pleasant experience for small businesses.

As we outlined in our article Why Your Bank Isn’t As Simple As They Say, features like bad customer experience and the lack of digitization make large financial institutions far from ideal for small businesses.

This is even more apparent when it comes to borrowing money. According to a survey, around 80% of loan requests from small businesses are denied.

That number is outrageous, especially considering that small businesses make up 99.7% of all US companies, according to the Small Business Administration.

Read on to discover the reasons banks aren’t good enough, and how Veem can help


Disappearing community banking

Over the past few decades, community banks have started to disappear. Large financial institutions have bought them up one by one, and the 2008 financial crisis sped up this process considerably.

Today, about 80% of the financial sector is controlled by 122 institutions possessing more than $10 billion in assets, and the number of banks has shrunk from 18,000 in the 1970s to 6,900.

And who’s hurt by this? Not consumers; their needs are more or less covered by personal accounts. And certainly not big corporations: large financial institutions perfectly cater to their demands.

Small businesses feel the disappearance of community banking directly. Community banks used to be their perfect partner: providing smaller loans based on mutual benefits, respect and trust.

After all, it was highly likely that the banker and the business owner knew each other personally, and had the same ultimate goal: to help their community thrive.

But large financial institutions don’t share that sentiment. The loans small business owners apply for are simply not large enough to be profitable for big banks.

Supply and demand just don’t meet.


After the 2008 financial crisis, loan regulations got tighter. Financial institutions needed to assess potential risks more rigorously than before.

Unfortunately, small business loans are perceived as riskier than lending to big corporations. This results in banks rejecting a lot more loan requests from small businesses, especially startups, than before.

Luckily, there are other options.

Financial technology, or FinTech companies have started to fill the gaps left behind by community banks. New lending mechanisms, like crowdfunding, have emerged, which are perfect for small businesses.

If you’d like to know more, check out our articles Crowdfunding for Small Businesses, and How to Attract Investors.


Loans are not the only problem. There are many other areas of banking that don’t take the needs of small businesses seriously.

International transfers are one of those needs. If you order a wire transfer at your bank, you can expect lots of uncertainty embedded in the process surrounding fees and timing.

If you order a wire transfer at your bank, you can expect lots of uncertainty embedded in the process surrounding fees and timing.

Even though your bank seems transparent about pricing, they don’t know the landing fees charged by the recipient’s bank, and all the other transaction fees levied by the intermediary banks (those financial institutions your transfer travels through to get to its destination).

Not to mention the significant delays all these intermediary institutions cause. And let’s not forget foreign exchange rates: banks are known for giving a less than favorable rate to their customers.

All in all, international wire transfers are a lot of hassle for small businesses. But, banks aren’t the only way.

Try Veem, the global payments platform for small businesses.

Veem allows you to send and request global transfers with just a click. There are no uncertainties, because Veem allows you to track all your transactions in real time.

Veem saves you not only time but money as well: we charge no wire fees and offer competitive foreign exchange rates.

And to top it all, Veem can provide an answer to your funding needs. Veem has partnered up with BlueVine, a leading provider of working capital financing small businesses.

If you’re in need of short-term working capital, BlueVine can help you out with a business line of credit up to $200k.

Sign up for a free Veem account and enjoy international transfers tailored to your needs.

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* This blog provides general information and discussion about global business payments and related subjects. The content provided in this blog ("Content”), should not be construed as and is not intended to constitute financial, legal or tax advice. You should seek the advice of professionals prior to acting upon any information contained in the Content. All Content is provided strictly “as is” and we make no warranty or representation of any kind regarding the Content.