Life for small and medium-sized enterprises is rarely comfortable. Even when your business is faring well, the capricious nature of policymakers and markets can upend carefully laid plans.
At those times, the value of a steadfast banking partner is immense. For its constancy in difficult conditions and its unwavering commitment to the bedrock of the economy, Bank of America is North America’s best bank for SMEs.
BofA set new records. In its business banking franchise – covering clients with $5 million to $50 million of annual revenues – it had its best year ever, increasing market share and adding a record number of clients.
Business banking revenues were up 20% year on year to $1.8 billion. Revenues in the global commercial banking division, which covers clients with up to $2 billion in revenues, were up 8% to $9.2 billion.
The best banking franchises always like to claim that they prefer tough conditions because those are the times when they can add market share as others struggle. For BofA’s SME franchise, the claim has the benefit of being true.
For Raul Anaya, president and co-head of business banking, the performance in 2023 was a testament to the work done in earlier years, particularly in hiring more bankers to cover clients.
“In difficult times, the role that our bankers played was to listen to their clients’ challenges and their concerns around inflation and interest rates, and then come back with ideas and solutions for them,” says Anaya.
“Often that has been around ways to bring efficiencies, whether through digital solutions, simplifying and automating processes, reducing their working capital requirements or managing their cash flow more efficiently.”
It is impossible to talk to BofA SME bankers for more than a few minutes without the conversation turning to CashPro. The platform is now so much more than a cash-management tool. For many clients, it is their portal for almost everything they do with the bank.
In 2022, the big new feature was the introduction of machine learning-driven cash-flow forecasting that drew on the vast amount of transaction data for each client that sits in BofA’s systems. In 2023, it was the injection of Erica – BofA’s longstanding virtual assistant – into the CashPro environment to let clients access all kinds of support.
CashPro continues to grow and grow, seeing 340 million client payments go through its systems in 2023, up 8% on the previous year. It regularly tops digital and mobile channel benchmarking studies, such as those run by Coalition Greenwich.
Small businesses were returning to some version of business as usual in the second half of 2023, having largely put investment activity on hold in early 2022 amid a lack of clarity around interest rates and what kind of landing might affect the economy after inflation had been brought under control. In those circumstances, the priority for business owners was paying down debt and ensuring they had plenty of liquidity.
Confidence is now rising again, and companies are willing to make investments in real estate and equipment. According to BofA’s latest medium-sized business owner report, 87% of those surveyed expect their revenues to increase in the next 12 months, 80% expect to expand and 69% plan to hire.
For its constancy in difficult conditions and its unwavering commitment to the bedrock of the economy, Bank of America is North America’s best bank for SMEs
As activity returns, the bank has been adapting its structure to cater to where the opportunities are greatest. In 2023, it established an industry focus within business banking covering four distinct segments: emerging growth companies, not-for-profits, government contracting and healthcare.
Anaya’s unit is at nearly the start of what BofA bankers like to call the business continuum. Small startups migrate into the bank’s business banking franchise and then move into commercial banking if they get bigger still.
“We want to be part of that business owner journey,” says Anaya. “The great thing that differentiates us is that we are local in over 160 cities and towns. We are part of the community.”
The president of global commercial banking is Wendy Stewart. Like Anaya, she saw the uncertainty heading into 2023 as a chance to get closer to clients.
“It gave us a great opportunity to go deeper with them, to understand what they need, how we can help them and how we deliver all the resources of our company,” she says. “And the first thing they needed was advice.”
More recently, conditions have allowed the bank’s medium-sized clients to look again at global opportunities. These are not deals that tend to make the front pages, but they are crucial to help these kinds of companies diversify.
An example of the kind of business that BofA’s global footprint can help to facilitate is the work it did for a US manufacturing client that was looking to grow via an acquisition in Europe. The bank was able to introduce it to another client, a European company that was part of a private equity portfolio, and a deal was done.
Commercial banking has also been looking at how it approaches industry sectors. In 2022, it put together a vertical that encompassed healthcare, technology, sponsors and restaurants.
Within that it also had a subset of new economy companies, comprising emerging healthcare, emerging technology and green economy. And during the turmoil of March 2023, as Silicon Valley Bank (SVB) teetered and then fell, triggering a broader upheaval, the coverage effort at BofA began to pay off.
“We could not have anticipated the challenges that we would see in the market in 2023; but having this team calling on their companies prior to the failure of SVB could not have positioned us better,” says Stewart.
It is a reminder, if one were needed, that it is always worth improving sector coverage. You never know what is around the corner.
