A good bank's advice can be invaluable. "You'd be a fool not to roll all your credit into one long-term note and free up short-term cash," CEO James Matras's Madison, Wis., banker noted after surveying the ungainly borrowing structure of Matras's company, Interstate Transportation Services, also in Madison. Following Firstar Bank Madison's suggestion, Matras fulfilled his obligations two years sooner than he thought was possible. The scary part, he says: "I wouldn't have done it if I hadn't been pushed."
Whenever Jeanne A. Englehart, CEO of Productivity Point International, in Grand Rapids, is about to make a major decision, she runs the situation by a United Bank of Michigan loan officer for professional feedback. But taking on an investor to acquire capital needed to maintain 40% growth seemed to be a no-brainer -- until the banking officer (also based in Grand Rapids) nixed her giving away any of the 12-year-old computer-training company and laid out "all sorts of creative options." The one that opened her eyes widest was an intricate, ultra-short-term credit formula that would free instant cash according to the ups and downs of her company's daily billings. "Now I don't feel pressured to have to take in an investor," says Englehart.
Nothing can threaten a company's working capital -- and its ability to service debt -- as much as overestimating the soundness of its accounts receivable. At Computer Parts & Services, in Plymouth, Minn., CEO Robert B. Kennedy says that his loan officer at Fidelity Bank, in Edina, keeps an eye on both capital and receivables for the company. The officer functions as a credit checker, contacting fellow officers at other institutions to verify the health of Computer Parts & Services' customers.
In running his company, residential-design builder BOWA Builders, in Arlington, Va., Joshua E. Baker wires "a lot of money" into and out of several accounts each day. The rapid-fire transactions would expose company finances to abuse -- if George Mason Bank, in Fairfax, hadn't set up an electronic watchdog that screens the flow for irregularities.
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Does it do something special for you?
Beyond an occasional wallet calendar, it's not the nature of most banks to travel the extra mile. Regarding one small institution that did, Reza Yazdani, CEO of G.H. Johnson Construction, in Tampa, says, "I'll take them anytime over a large bank." Before he moved his accounts to the smaller entity, Yazdani passed the finances of his $39-million (in 1994 sales) construction-management business through the biggest lending institution in northern Florida. His rationale: a lesser bank's loan ceilings would be an impediment to growth. At the large bank, on the other hand, loan officers turned over rapidly, which kept them from becoming familiar with Yazdani's company. But now a close relationship flourishes between G.H. Johnson and little First Commercial Bank of Tampa, where "everyone recognizes who you are, and the president knows all about the company."
As for loan limits, when G.H. Johnson needed more instant capital than the little bank was allowed to lend, First Commercial came up with the money by seeking and finding a second bank it could team up with to offer the line of credit. "They may be small," Yazdani says with appreciation, "but they play a big game."
First Union National Bank of Florida in Jacksonville refuses to let the funds of $113-million Sterling Healthcare Group Inc., in Coral Gables, Fla., sit idle. Every evening the bank sweeps deposits from the health-care provider's lockboxes in 19 states and channels them into a central account. By 10 o'clock the next morning, it dispatches a report of deposits and disbursements that helps chief financial officer Jack Greenman decide whether to borrow, invest, repay, or just sit tight. Even if Greenman doesn't earn a nickel that day, at least he's not paying an outside vendor for the service, as he once did.
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Does it accept responsibility for you?
They don't like to admit it, but banks do make mistakes. Few of them, however, clean up afterward as thoroughly as First Tennessee Bank, in Greenville, Tenn., does. No sooner was a posting error discovered in the accounts of $25-million (in 1994 sales) garden-tool maker Dejay Corp., in Palm Beach, Fla., than the bank was on the phone getting Dejay off the hook. It contacted every customer or vendor who may have received an unpaid check, explained the situation, and shouldered the blame. "This," says Dejay CEO David J. Blotnick, "is a relationship not based solely on dollars and cents."
Cash-strained by having to meet payroll before his clients had paid his new temporary-employment firm in San Francisco, Computer Resources Group founder Richard D. Green had violated loan covenants virtually off the bat. Rather than shrink or revoke his credit line, Imperial Bank, in San Jose, admitted that it hadn't understood the pay-in-advance nature of the emerging temp industry when it wrote the covenants. Conventional debt-to-equity ratios couldn't apply to such pronounced periodicity, the bank conceded, and it rewrote the terms of the company's credit line.
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Does it let you borrow against the future?
In 1994 TPL, in Albuquerque, landed a contract from the U.S. Army -- the fattest contract the technology-equipment manufacturer, then at $2.5 million in revenues, had ever had. But finances to get the job going were hopelessly beyond the company's means. TPL already had a $250,000 line of credit at its local bank, which the lender wouldn't increase. After stymied founder H.M. Stoller told the sad tale at a local small-business gathering, the story networked its way to the ears of the CEO of Los Alamos National Bank, in Los Alamos, 100 miles up the road. He invited Stoller to lunch and declared: "You're the kind of company we need to encourage in New Mexico. I'll take your case." Within two weeks Stoller had half a million dollars. The primary collateral: the government's promise to pay -- not always prime security. "When you shake hands over coffee with a top executive whom you've never seen before and who isn't even in the neighborhood, and he personally presents your request to the loan committee," marvels Stoller, "you tell yourself, 'Boy, this is one different kind of banker!"
