Can Your Bank Do This?

If not, maybe it's time for a new one

"Sure, they give you money -- when you don't need it." "You're a cipher to them." "You could fall into the Chapter waiting for a decision." "They don't understand your business." "They demand your inventory and receivables -- not to mention your house and your car." "They change loan officers with the seasons." "You can't talk to a bank. . . . "

Every entrepreneur recognizes the litany of complaints that small businesses have been chanting about banks for ages. But what haven't hit the charts yet are some sprightly new verses: "They're a great partner." "They respond to our needs." "They're always there when we need them." "We wouldn't be in business without them." "They're a trusted adviser." "Their word is their bond." "They believe in us, and we believe in them." "They're incredible businesspeople." "They never wavered through bad times." "They actually worry about our business." "They make us feel like family." "They gave us a loan when no one else would." "I love doing business with my bank!"

Those and similar paeans were sounded by the respondents to Inc.'s recent survey about small-business banking relationships. In the poll, more than 500 fast-growth companies numerically rated their banks on such matters as communication, lending procedures, quality of service, and emphasis on small business. The frequency of perfect scores isn't as surprising as the number of fast-growth executives who appended written notes effusively praising their banks. Not so long ago, the same institutions were labeled by much the same group as tightfisted bureaucrats.

Of course, it's natural for a bank to be nice after a credit crunch ends and it's looking for customers again, which is the situation many banks have found themselves in. In this cycle, though, bankers have transcended a mere sense of hail-fellow-well-met. A small-business person today can find not only someone willing to lend but a lender who at once is efficient, knowledgeable, generous, supportive, protective, instructive, accessible, appreciative, patient, reasonably priced, and an active small-business advocate as well. How did such a stunner come about? In a sentence, an overabundance of easy money fueled such intense competition for new clients that a fast-growing small enterprise is no longer perceived to be the credit risk that banks in the early 1990s insisted it was. The proof: some banks are now willing to take on start-ups.

Through follow-up interviews with scores of owners and chief executives, Inc. benchmarked the practices that, in the eyes of fast-growth companies, define the best in small-business commercial banking. Here are some of the particulars that suggest how a company in need of capital should expect its lender to perform. Ask yourself these questions about your bank:

Does it see you through adversity?
Back in 1990, then $7-million Century Marketing, a custom label manufacturer in Bowling Green, Ohio, had a chance to acquire its major competitor and corner the market. To fulfill that prospect required a whopping $2 million in up-front cash, which Fifth Third Bank of Northwest Ohio, in Findlay, Ohio, agreed to finance via a line of credit secured by the new inventory, accounts receivable, and equipment. But due diligence had failed to uncover potential pitfalls. As a result, Century Marketing promptly posted losses, straining its ratios and throwing the line of credit out of covenant. Despite the grave turn, "the bank didn't put pressure on us," chief financial officer William Horner recalls gratefully. Instead, its officers met monthly with company management "not only to monitor the situation from their end but to encourage us when we needed it."

That kind of support can be crucial. "We have a personal relationship with the highest officers of the bank," says Charles M. Engberg, founder of Milwaukee architecture firm Engberg Anderson. It's a good thing, too. A first-time entrepreneur, Engberg had geared up to meet the demands of a construction project. When building-contract problems arose, Engberg's company had nothing to recommend itself to its banker except the character of its founder and a couple of big projects down the line. As contract bickering dragged on for months, Engberg had to meet an expanded payroll on unexpanded billings. "We got drained," he says, summing up the inevitable result. But Park Bank, in Milwaukee, came to the rescue. The lender expanded Engberg's credit, asking only good faith as collateral. "They understood the nature of the business," a now-wiser Engberg concludes, "and saw us as a company they were willing to take a risk for."

Does it save you time?
Thanks to the Small Business Administration's "low doc" and other small-business-specific programs, in recent years some banks have reduced both paperwork and application-response times -- in a few instances, all the way down to nothing. Charles Carvette of Mississippi Blending Co., in Norwalk, Conn., gave local banks every chance to win the financing of his family's business. But the conservative Yankees were worried that the cash-starved company (it blends food products made from cornstarch) wouldn't survive. Now Carvette banks half a continent away in Keokuk, Iowa, whose State Central Bank knows cornstarch. So well that when Carvette recently needed a quick $2 million to cover a bid in that market, the loan was done by phone that day. "I didn't even have to fill out papers," Carvette crows.

The loan officer of Vanguard Research, a $9-million (in 1994 sales) computer-systems integrator in Fairfax, Va., is the president of the bank. Which, declares CEO Mel Chaskin, "cuts a lot of paperwork." Not only that, but the willingness of Franklin National Bank of Virginia, in Alexandria, to poll its loan committee by telephone when a company needs a prompt decision cuts nervous waiting time, as Chaskin discovered when he needed some short-term capital. Turned down by the bank with which his company then had a substantial demand-deposit relationship, he put the question to Franklin National: Can you do $250,000 for 30 days? A phone vote had the money in his account in 3 days.