Credit unions are increasingly garnering a bigger piece of this financial pie. In a 2006 Aite Group survey, one out of four small business customers were already turning toward community financial institutions as their primary provider. And credit unions' share of that pie has grown from 7% then to an estimated 9% now, she said.

Among Barry's respondents, branch proximity (48%) and customer service (45%) were ranked Nos. 1 and 2, respectively, when selecting a financial institution. Online banking offerings particularly stood out when evaluating the latter.

"Of small businesses surveyed, only about half stated they are 'extremely satisfied' with the level of customer service, the online banking capabilities and ease of use of the online banking applications at their financial institutions," Barry said.

The larger the small business, the more satisfied they were with the service offered, the Aite Group analyst said. Businesses with annual revenues above $1 million indicated the highest grades of customer service satisfaction.

Still, very few small businesses, Barry found, were satisfied with service levels in areas that matter to them most. For businesses with less than $1 million in annual revenue, this would be the number of branches or ATM locations at their disposal. Their larger counterparts (generating between $1 million and $10 million per year) pegged rates or fees on deposits and loans as most important.

This disconnect between needs and offerings, Barry predicted, could be disastrous for credit unions concerned with member attrition.

"At a time when competition is fierce and customers are not showing high levels of loyalty, financial institutions need to focus greater attention on improving their deficiencies and better understanding small business wants and needs," she said.

One example would be business-specific checking accounts. Businesses being serviced by such accounts expressed far greater satisfaction than those having needs fulfilled via retail products. Smaller businesses are most likely to experience this potential disconnect, Barry said. Annual revenue, she found, often determined service levels offered.

"Larger businesses are more likely to be served from the corporate side of the bank or by standalone small business units that have a better understanding of their needs, compared to those smaller businesses being serviced from retail banks," the Aite Group analyst said.

Looking forward, Barry expects online banking to be the most important area of emphasis in servicing small business customers of all sizes. Nearly two-thirds of them already actively bank online, a number expected to climb to 75% over the next two years. Checking and credit accounts round out the list of most desired future products for small business.

Barry also found a small base of businesses prepared to spend on fees to keep multiple products within the same branch and would endure monthly fees for access.

"While small businesses are not easy customers to serve, they are becoming more sophisticated in their needs. As a result, those financial institutions willing to make the effort to understand them are promised a large stream of much-needed, fee-based revenues," she concluded.

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