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updated: 5/16/2019 9:31 AM

How banking consolidation can impact your business

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At the recent Small Business Economic Forum, one of the key take-aways from our panelists was that we all need to work together to help businesses start, stay, and succeed in Illinois. As a banker, we are a source of capital for businesses in Illinois whose sole mission is to do just that. America's banks play a crucial role in driving economic development in the U.S. and we are proud to be a part of that positive message.

According to the American Banker's Association, banks have 18.6 million customers in the state of Illinois, with $482.5 billion in deposits, and $13.4 billion in small business loans. However, the state of Illinois is not seen as business-friendly. We have our share of issues with taxes and pensions that tend to cloud our more positive statistics, such as that Illinois has the 5th highest GDP in the U.S. and is home to more than 38 Fortune 500 companies and more than 1,900 foreign companies.

With so many businesses in Illinois, we need banks to stay here as a foundational source of capital. Yet, there are fewer and fewer banks to choose from as mergers and acquisitions become more rampant, particularly in the Chicago area. Banking consolidation is one of the challenges that businesses face in Illinois -- and frankly, across the U.S. When one bank acquires another, it may be positioned as a way to scale up and expand services. However, it often means that customers in a certain segment get left behind. And the pace of consolidation looks like it will only increase in the coming years.

As a business owner in Illinois, you may face several obstacles if your bank is changing ownership. Primarily, newly merged banks can ostensibly double in size and therefore may institute minimum thresholds for different market segments, industries, or loan amounts. Business owners should confirm that their revenue threshold meets the minimum for that industry to remain as a customer. Will a $1 million line of credit still matter to a much larger, merged institution?

A merger or acquisition may also result in a change in product offerings. Products that you value most in your business bank may no longer be offered or may look very different. Additionally, your business may be required to resubmit all financials for re-evaluation upon conversion.

Oftentimes, it's the relationship with a banker that is most important to business customers. A merger can cause disruption in staff and inconsistency in a banking relationship. Decisions may no longer be made locally if the merger or acquisition involves an out-of-state bank. Also, customer service can become an issue, especially if you are accustomed to banking with a local community bank. In a merger, your customer service calls may be outsourced to an unfamiliar, distant call center instead of being directed to a representative from your local area.

While your banking choices may seem limited on the surface due to the diminishing number of banks in Illinois, remember that there are still banks out there that value banking relationships of all sizes and in all types of industries, i.e. banks that want to see your business start, stay, and succeed in Illinois.

• Michael G. O'Rourke is President & CEO of Signature Bank in Rosemont.