Learning to Live with (or Without) Your Banker

Feature posing important questions to consider regarding your banking strategy.

1 | 2 | 3 | 4 | 5 | 6 | 7 NEXT

Questions you should ask yourself before deciding what kind of banking strategy your company needs

Mention bankers to Stephen Davies and he's likely to tell you his rhinoceros joke: "Why is a banker like a rhinoceros? Because he's thick-skinned and charges a lot." Or he may ask you what the collective noun is for lending officers ("panic"). Davies, president of U.S. Computing Maintenance, in Farmingdale, N.Y., a $15-million on-site computer-maintenance business and four-time Inc. 500 company, finds bank humor especially savory because he spent 10 years lending to small businesses before becoming an entrepreneur. "Bankers take themselves too seriously," notes Davies. "I thought I was a businessman. Since I left I realize I didn't understand what was going on. I didn't know what I didn't know."

The responses of entrepreneurs to a recent survey about banking echo Davies's sentiments, often in much stronger terms. Bankers "are a hateful, stupid, useless breed," says Jeff Winant, president of Leveraged Technology, in New York City. "They couldn't care less about my success," says Ned Dempsey of Century West Engineering Corp., in Portland, Oreg. "Some of them are nothing but clerks, really," notes Mark Paper of Lewis Bolt & Nut Co., in Wayzata, Minn. "They're people with no comprehension of our business, whose primary concern is protecting their butts," states Karen Kennedy, president of KSK Communications Ltd., in Vienna, Va.

OK. Enough slings and arrows. It's clear that entrepreneurs have horror stories about banks that rival the perfidy of the legal profession's most egregious ambulance chasers or medicine's most skilled malpractice artists. But does anyone tell those war stories with pride? Unlike false starts, insane hours, and fabulously off-the-mark projections, banking blow-its don't have to be a part of every entrepreneur's rite of passage. "Company owners don't think twice about hiring a CPA or an attorney when they need one, but do they think about asking a banker for financial-service assistance?" Denise Qualls, a relationship manager (that's 1990s bankspeak for loan officer) for a Citibank branch in Los Altos, Calif., asks that question rhetorically but then adds that she's beginning to see an increase in entrepreneurs' willingness to ask banks for help. "Slowly, their comfort level is rising," she says.

Banks, and bankers, don't have to be the enemy. In fact, there's every indication that banks are looking to small businesses (that is, companies with revenues less than $5 million) and middle-market ($5 million to $200 million) sectors now more than ever. "Small is where the growth is," says David Aloise, who heads up the New England division of Bank of Boston's recently formed Small Business Banking Unit. Banks are turning increasingly to small entrepreneurial companies not only because those companies are the primary job generators fueling today's economy but also because of what to banks is a terrifying development: large companies are (gasp!) taking their business elsewhere.

Easier access to equity-capital and institutional-debt markets has caused a decline in loan demand from big companies. And the businesses that do stick around are tough customers, insisting on rates and terms many banks are hard-pressed to deliver. (One global giant referred to a $30-billion institution as "a nice little bank.") This is great news for small businesses. As Eric Rosengren, a vice-president and economist at the Federal Reserve Bank of Boston, told an audience of bankers at a convention last May, "The shrinking profit margins on lines of business to large customers have encouraged banks to focus more attention on small-business borrowers."

How much attention? Even the Feds are getting into the act, exhibiting surprisingly keen interest in the small-business-lending sector. The FDIC Improvement Act of 1991 mandates that financial institutions include their small-business-lending data in their annual call reports. (The act requires banks to report small-business loans of less than $1 million; previously, they reported total loan volume with no breakdowns by size.) The idea is to provide consumers (and fellow bankers) with a more accurate picture of a particular institution's small-business-lending activity. The Small Business Administration is in the middle of a study that analyzes small-business call-report data by state and ranks banks in terms of their service to the small-business market. As the study's director and the SBA's chief economic adviser, Robert E. Berney, states in the conclusion to a draft of the study, "The goal of the study is to make more credit available to small-business borrowers by increasing the knowledge of consumers' banking services. Knowing that some successful banks are active small-business lenders will hopefully encourage other banks to compete for the small-firm customer."

1 | 2 | 3 | 4 | 5 | 6 | 7 NEXT

Try a RISK-FREE Issue of Inc. Today!

Renew | Contact Us | Current Issue

Select Services