The Best Small-Business Banks in America

Chances are, you could turn your bank into one of the best. Because it's not the bank, but the relationship with your banker, that counts. Here's how smart CEOs take the initiative

Last winter, in our January Faxpoll (No. 04920241), we invited readers to tell us about the frustrations they were having with their banks. The responses poured in. Hundreds of small-company owners vented their spleens -- about everything from what they saw as unreasonable lending standards, to banker arrogance and poor service. But interspersed among those opinions were a significant number of replies from people who had nothing but praise for their banks and their bankers. That piqued our interest. What, we wondered, were these company owners doing that the rest of us could learn from? What follows are some answers to that question.

"I doubt if I have a handful of customers who present information the way she does."
-- Jennifer Norrid's banker

Jennifer Norrid had no illusions about her knowledge of banking when she met for the first time with a lending officer at First National Bank in Albuquerque, in early 1986. An energetic woman of 24, Norrid had been running her own computer-training business -- a three-year-old business she'd launched on $248 in savings. She had recently moved her $200,000 business into a tiny rented office and had already talked to a succession of bankers about borrowing $65,000 to create and equip a training room and to hire her fourth employee. Yet in the space of three weeks, three or four lenders had told her, in no uncertain terms, that she wasn't bankable.

"Each time, I'd ask the banker, 'What would it take for you to approve this loan?' " Norrid remembers. But nobody had any ideas; some simply shrugged.

Before her appointment with Michael Hartman from First National, Norrid spent hours at the law library of the University of New Mexico, researching how a business qualifies for a guaranteed loan from the Small Business Administration. From her queries, she also knew Hartman's bank was one of the two biggest SBA lenders in the state, and Hartman was one of two or three lending officers working on those loans.

Hartman, who had begun lending four years earlier after a brief stint as a state bank examiner, agreed to give Norrid's proposal for an SBA loan a close look, which in itself was a breakthrough. Although Norrid had limited training and experience, she had glowing client references, which Hartman liked. A couple of days later, he called her with news: No, he couldn't lend $65,000 -- her operating record was too erratic. But he was willing to consider a smaller loan -- one for, say, $48,000 -- provided she could pull together $15,000 in cash as collateral. The collateral, he explained, would reduce the level of risk for both the bank and the SBA. Norrid didn't have assets of her own, so Hartman made a suggestion: Did she know anybody who could deposit money at the bank? She thought of two possibilities, and both agreed to buy certificates of deposit. Two weeks later, Norrid had her money.

Since then, PC Support has grown to around $1.2 million in revenues and 34 employees. One feature that's marked Norrid's dealings with the bank is candor. "She doesn't just tell me when things are going well," says Hartman, who remains Norrid's primary contact at First National, a locally owned institution with $1.3 billion in assets. "I hear about the problems, too."

Shortly after getting her SBA loan in 1986, Norrid ran into a streak of bad luck. A roofing problem postponed the completion of the new training room; then a significant consulting contract fell through; on top of all that, Norrid had some health problems. Although she informed Hartman about each development, the cumulative effect worried her so much that while she recuperated from surgery, she set up an appointment with Hartman to talk about her options. She was $40,000 behind her sales projections, she told him, which meant she might have trouble meeting her loan payments for the next few months. Could she borrow another $5,000 until things picked up? Unfortunately, Hartman said, he wasn't able to make loans for that purpose. But he could help her write a letter to the SBA explaining her situation. Based on that letter, the SBA agreed to let her postpone principal payments for three months, reducing her cash-flow needs by about $600 a month.

Norrid doesn't wait until she's in a jam to initiate discussions with the bank. In 1989, for example, PC Support was preparing a bid on a big, three-year consulting deal, one that would have more than doubled the company's billings. "Of course, we didn't know if we'd get it," Norrid says, "but I wanted to know what might happen if we did." Once again, she asked Hartman if the bank would lend her money to support the additional business. He indicated that the shortage of collateral would present some problems. By the time Norrid got word that PC Support had won the business, Hartman had personally scoped out some other possibilities. He directed her to a special loan-guarantee fund, managed by the city of Albuquerque, which, in short order, approved an $85,000 line of credit.

Altogether, Hartman is responsible for some 114 business relationships for First National, which means that on some level, customers are constantly vying for his time. But Norrid doesn't have a problem getting the attention she needs. "When she calls, I know she has something relevant to tell me," says Hartman. "I'd say she's one of the best-organized customers I have, and it makes doing business with her very easy."

Until a couple of years ago, when she hired a new controller, Norrid sent the bank financial statements quarterly. Now she sends information monthly -- a balance sheet, an income statement, and a cash-flow analysis. Hartman also receives two pages of PC Support's financial ratios (tracking performance over a six-month period) and a page of graphs. How does Norrid know which ratios to include? A year or so ago, she asked Hartman which ones he wanted.

"I doubt if I have a handful of customers who present information the way she does," says Hartman. "She'll tell me in a letter or over the phone about deviations from her projections and what caused them. So when it comes time for annual reviews, there's not a lot of work to do."

Norrid says that over the years she's come to appreciate Hartman as a business adviser as well as a banker. Occasionally, she says, he'll feed her names of customer prospects, and she'll often seek his advice on preliminary plans. "I'll ask him, 'What kind of money is available for x?' " And she isn't afraid of showing him first drafts of her budgets just to hear his reaction. "If there's something he wants me to substantiate more fully, I want to hear it."