When I was growing up on a farm in Wisconsin, I couldn't imagine why anyone would want to be a banker," says Dean A. Treptow. "Bankers were condescending people who crushed my family's friends by turning them down for loans."

But Treptow, now 51, did become a banker, albeit an unusual one. For one thing, he's never taken an accounting or finance course. For another, he -- unlike many of his colleagues in pinstripes -- enjoyed dealing with small, growing companies. "When I was a branch manager for First Wisconsin National Bank, the state's largest bank, the phone company was one of my accounts. How much satisfaction do you think there is negotiating over the number of mills you can shave off each transaction charge? With small companies, you can make a difference. You can help them grow." Treptow took that attitude with him to tiny ($14 million in assets) Brown Deer Bank in a suburb of Milwaukee when he was hired as president in 1973. By concentrating on lending to small and midsize companies, he increased business eightfold by the time First Bank Systems acquired Brown Deer in 1988.

Today Treptow is chairman of Polaris Group Inc., a Milwaukee-based investment firm, so he deals with banks as a client. Having sat on both sides of the desk, he's happy to share some of his thoughts about the care and feeding of bankers.

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You always shop around for the best suppliers. Well, finding a bank is no different. Banks, after all, are just another supplier -- of money. After your friends, attorney, and accountant have given you a list of potential banks, Treptow suggests, play the "Match Game." Ask each of your would-be bankers:

1. Do you understand my business? If your banker does, you won't have to spend a lot of time educating him about your market or the problems you'll likely face.

2. Do you like people like me? A sure tipoff: look at the bank's board of directors. Are there any owner-managers on the board, or are they all captains of industry?

3. Who am I going to be dealing with? A junior person who runs messages between the loan committee and me? Or someone authorized to make his own decisions?

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HOW MUCH MONEY?

Enough Is Enough

If you need a $750,000 loan, ask for a $750,000 loan. "The most consistent mistake entrepreneurs make is not asking for enough money," says Treptow. "If they know they need $750,000, they do the most optimistic projections they can, and then ask for $500,000, because they're afraid of being turned down. Then six months later they have to ask for another $250,000. The lending officer is surprised you couldn't meet projections, and you become suspect in the bank's eyes." Ask for what you need and don't compromise, says Treptow. "If you apply for $750,000 and the bank only offers $600,000, go somewhere else."

CHOOSING A LOAN OFFICER

You Want a Meaningful Relationship

Having narrowed your list down to two banks, make your decision based on who your loan officer will be. You aren't entering into a relationship with First National City State Federal County Bank. You're going to be dealing with Laurie, the loan officer. Before you sign up, you want to know everything about her you possibly can.

How old is she and what's her background? If Laurie is 51 and a veteran of the mortgage department, you lose on two grounds, says Treptow. Her age and background tell you she has spent most of her working life in banks when they were heavily regulated. Odds are she's not going to be overly flexible. And her mortgage background means she's used to making loans based on strict formulas. Laurie may be a lovely person, but she's probably not for you.

Also, how much authority does Laurie have? Can she approve loans for $500,000 or does she need somebody else's OK if the loan is more than $32.50? "It doesn't do you any good to deal with someone who really believes in you, if they're green and aren't allowed to make decisions," says Treptow.

If Laurie won't tell you where she stands in the bank hierarchy, or if she's evasive, "she's given you all the information you need to know she's not the person for you."

Get to Know the Boss Even assuming Laurie the loan officer is the right person, get to know her boss. "Meeting as many officials as you can will help you modestly in your initial loan request," says Treptow. "But it will help enormously later on if you have a problem. If they know you, the people empowered to call the loan are likely to treat your blunder as an isolated instance, one strikeout from a real good hitter. If they don't know you, they won't be as sympathetic."

To meet the higher-ups, ask Laurie to invite them along when you give her your plant tour. "Or when you go to the bank to make a presentation, say, for an expansion loan," says Treptow, "tell the senior officers you'd like to hear their reactions to your plan in case you have overlooked something." Flattery never hurts.

CREDIT RATING

How the Bank Grades You

Whether you get your loan will depend to a large extend on how well the bank's computer likes you. All banks use credit-scoring software programs that analyze your past performance, examine your balance sheet and profit-and-loss statement, and project your future.

To better your chances, says Treptow, find out what software the bank uses. Buy it, plug in your numbers, and see where you might be vulnerable.

If the bank won't tell you which program it uses, Treptow advises going down to your local software store and buying any of the six or so bank scoring programs their likely to have in stock. They all cover the basics. He isn't counseling fraud here: you don't want to lie or conceal problems. But within generally accepted accounting practices, there are often two ways to record a transaction. Why not use the one most favorable to you?

Here's an example. Start-up owners will frequently give up a paycheck or two, or loan the company money to keep it going. That loan can be recorded as debt, of course, "but it's really equity," says Treptow. "Why not move it into the capital section? That more accurately describes what's gong on -- and it cleans up the company's balance sheet at the same time.

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BANK SOLVENCY

How to Grade Your Bank

Get ahold of the bank's financials. You're not likely to suffer directly if your bank fails, but if the bank runs into trouble or is taken over and cost-cutting measures are imposed, you'd rather not deal with bank officers who are worried about losing their jobs.

There are a couple of ratios you should pay close attention to as you go through the bank's numbers. "If the capital-to-asset ratio is less than 6%, it doesn't necessarily mean the bank is unsound, but it will be getting a lot of pressure from regulators who will want it to be more cautious," advises Treptow. "Similarly, if aftertax earnings are less than 1% of assets, there is likely to be pressure from either the regulators or the bank's board to be conservative." In either case, you might be better off going with another bank.

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PRICING SERVICES

All Right Already, What's It Going to Cost?

Not so fast. You can't figure the true cost of your loan until you do all the arithmetic. For example, there's the matter of compensating balances.

"A $1-million loan at 2 ½ points over prime can be better than the same loan at 1 ½ points over," says Treptow. "But that can be hard for entrepreneurs to understand. To get the loan at 1 ½ points over prime the borrower might have to maintain a 15% compensating balance. That means in order to get the loan, you must keep $150,000 [15% of the loan] in an noninterest-bearing account." If you invested that $150,000 at 8% simple interest, you could make $12,000 a year on that money.

Also, you have to know how the bank handles service charges. Typically, banks assess a fee for each deposit slip, each individual deposit, and each check you write. "But the charge is either 'hard' -- they take it out of your account -- or 'soft.' If it's soft, you're given a credit based on the amount in your corporate checking account.

"By law, banks can't pay you interest on that money, but they can waive service charges. Some banks figure out what you would have received if they had paid you interest and apply that amount as a credit toward the service charges. If that credit doesn't cover the charges, the balance is deducted from your account. If there is an excess, some banks will roll it over and apply it toward next quarter's service charges."

The Three Pricing Components

1. The risk of the loan. How likely is your company to go belly-up?

2. Labor intensity. How much time will the bank have to spend on your account? Will it have to keep cleaning up your financial statements and calling for more information? The more time you spend on your internal financial statements, the less the loan will cost you.

3. The bank's profit goals. What does it want its margins to be?

LOAN AGREEMENTS (I)

Covenants

"Don't worry too much about the boilerplate," advises Treptow. "If you're clever and polite, you can probably negotiate most of it away. Ask the banker, 'What are you concerned about? What kind of protection do you need?' " Then draft a whole new agreement -- one that eliminates the boilerplate. Most bankers will be receptive to this approach. There's no reason they shouldn't be. They still get the guarantees they need, and you've eliminated any of the mumbo jumbo that might hurt you later on.

If there's one clause in the basic agreement that the banker is unlikely to take out, it's the one dealing with receivables. It's likely to read: If receivables go above X% of assets, or if Y% of all receivables are more than 90 days old, we call the loan.

"That's there for obvious reasons," says Treptow. "When receivables get out of line, it's usually a sign that the business is in trouble." But receivables are within your control. Since you know they will be a sore point, take care of them.

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LOAN AGREEMENTS (II)

Personal Guarantees

Initially, most banks will require personal guarantees. "Usually the bank will cancel personal guarantees if you hit certain earning projections for a specific period of time," says Treptow.

After you and your loan officer have worked out what will be required to eliminate the guarantees, drop the bank a note outlining the arrangement. That will prevent problems later on.

LOAN AGREEMENTS (III)

The Checkup: Statements and Audits

Bankers love clients to send monthly financial statements. They also love annual audits. Both allow them to sleep better at night. But those security blankets can cost you a lot of money.

"I'd offer to send the bank the numbers you use to run your company," says Treptow. "If you're already preparing monthly statements, then it's no big deal. Send them a copy. But if you're only using quarterly numbers, discuss that with the bank. They may consider them sufficient.

"Audits are another matter. They're expensive, easily running $15,000. See if the bank will settle for your accounting firm doing a review instead. A review covers the same subjects as an audit, just not in the same detail and depth."

Start-Up Capital From banks? What, are you kidding? Treptow isn't optimistic about the chances of getting bank funding for a new venture, no matter what you offer as collateral. "You'll increase your chances by stressing relevant experience in your loan application," he says. "Unfortunately, you'll still likely be turned down. It's just a fact of life."

'Give the banks you're considering extra points if they're willing to hold the initial meeting at your office, not theirs. It shows flexibility on their part.'

What to Wear to Your Interview Take that dark blue number -- the one you jokingly refer to as your banker's suit -- out of the closet and put it on. Says Treptow: "If you come in looking like a turkey, they won't be concentrating on what you're saying."

The worst outfit Treptow has ever seen? An electric-blue ensemble worn by an entrepreneur who had on more jewelry than Mr. T. "Every time he moved in his chair, the light refracted off this huge diamond pinkie ring. He didn't get the loan.

"I never held it against an entrepreneur who worked in manufacturing if he came wearing work pants and a work shirt. As long as they were neat and clean, I thought that was fine."

'There's nothing wrong with shopping around, even after you've developed a relationship with a bank. You want to know what else is out there. Don't say to your banker, "I've been talking to your competition, and here's what they've offered." But I'd let him know you think some terms could be improved.'

We Can Work It Out? Ask if the bank has a workout department, full of the folks in charge of troubled loans. If the bank you're considering has one, it tells you two things. Both negative.

1. Banks with a workout department might be a little quicker to call your loan. The logic? If those guys aren't working on problem loans, why are we paying them?

2. If the loan officer can send a problem to the workout guys, then he has less incentive to help you turn things around himself.

The Bank Will Start to Worry If . . .

1. Receivables start ballooning.

2. It gets lots of phone calls from your creditors, who want to know if you can cover the check you just wrote.

3. Your profits start falling below expectations.

4. You don't return their calls.

Business Plan Checklist

* Neatness counts. "If your business plan is sloppy, the implicit impression will be you're sloppy in running your business," says Treptow.

* Don't send a badly Xeroxed copy. "People will think you ran off 100 copies to send to 100 different banks. That isn't going to help your chances."

* Unique isn't necessary. "We had one guy handwrite his plan on the back of a roll of shiny shelving paper. He got noticed, but it didn't help."

* Bankers want balance sheets. "Apparently the word is out that bankers don't want to see balance sheets with the plan. In the past few years, 75% of the plans we got didn't have them. We want them."

* Tailor the plan to hit the bank's hot buttons. If, for example, during your initial conversations with the bank you find out it's fanatical about keeping receivables in line, throw in a paragraph or two about how you handle collections.

Be Nice to the Little People More than one entrepreneur has lessened his chances of getting a loan by being rude to Treptow's secretary or his support staff. "If they were unpleasant, abrupt, or just downright nasty, I was predisposed not to like them," he says. "If you're known to be 'difficult,' you're going to be dumped on the meanest SOB in the bank, or someone too green to know better, if your loan officer leaves."

'Most banks put on seminars. Go to them. The bank's management most likely will be there, and you get another chance to meet them and, more important, for them to meet you.'You'll Know the Bank Is Worried If . . .

1. Your banker won't take your calls.

2. When you do get through, he's evasive; he doesn't want to talk about your account.

3. Your calls get referred to someone you've never met.

-- by Paul B. Brown