Bank marketing departments still peddle the idea that small-business lending is keeping banks humming. But these days more and more banks are slamming doors on growing companies looking for new loans, even as they put the squeeze on existing borrowers. The chill in lending often has less to do with customers' problems than with those of banks. If your bank is freezing you out, how should you go about finding one that's better able to meet your needs?

How to find a bank. Even in tight markets there are usually a few lenders open to new businesses. The best way to find them is to pay attention to the performance of banks in your area and to ask around. "If a bank is earning 1% or more on its assets," offers Steve Cranfill, a principal at Management Advisory Services Inc., in Seattle, "it's probably more aggressive in its lending." Talk to businesspeople, accountants, consultants, and business groups. If you can, get specific names of bank executives and lending officers to contact. Personal introductions can be enormously helpful.

Many people who have gone through the process of looking for a new bank say it can take months, so it's a good idea to initiate contacts even before you're under any pressure.

What to find out. Once you've targeted the banks to approach, make a list of the issues you want to explore. Before providing a lot of detail about your own business, try to get a sense of how each bank operates. What's the management philosophy? How is the lending department organized? What level of the bank's hierarchy would you be dealing with, and what would happen should the person you are dealing with leave?

Sooner or later you'll want to probe other areas, too. What does the bank know about your industry? What does it like to see in the way of numbers, ratios, and other information? Also, how does the bank monitor credit? Does it try to work with customers who run into problems, or does it panic?

Don't expect bankers to be totally candid. To get a fuller picture of a bank's lending policies and service, talk to current and former customers, suggests Ed McClelland, a former banker now consulting to small businesses in Dallas. Even when you're looking around, be careful not to burn your bridges with your existing bank; you might not find anything better.

How to make the decision. In the end what you really want to figure out is which bank can make the strongest commitment to understanding your business and meeting your needs. Who will be the best business partner? Relative costs -- the interest rates and fees -- should be a factor in your decision, but a more appropriate consideration nowadays should be the financial health and integrity of the bank. "If you really want to make a good decision, take time to get to know the people you'd be dealing with," says McClelland. In the rush to get away from frustrations with one bank, the last thing you want to do is to fall victim to problems at another. -- Bruce G. Posner

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