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.

Indeed, presidents now mix it up with customers out on the banking floor itself. A merchant banking firm that owns and operates several companies, New Canaan Capital LLC, in New Canaan, Conn., affiliates with a number of lenders. But, according to senior partner Ronald J. Manganiello, none is as accessible as New Canaan Bank & Trust Co., also in New Canaan. The president's desk there is right out in the open, and "you can go straight to him," says Manganiello, who often does just that. "It makes me feel like a big shot, though I'm not."

Banks have other ways of making customers' jobs easier. "They do the walkin' while I do the sellin'," is a ditty Rick Kramer, CEO of Arlington, Va., telecommunications-marketing company Faxplus, likes to recite on behalf of NationsBank, in Bethesda, Md. The bank's Professional and Executive Banking Division is designed specifically to save time for busy small-business managers by assigning a single "point person" to deal with a customer's banking needs across the board -- loans, investments, personal accounts, corporate accounts, and such.

First Union National Bank of North Carolina, in Charlotte, N.C., didn't have branches in four of the five states in which American Ophthalmic does business. Normally, it falls to the customer to line up its own banks in other states and set up a fund-transfer arrangement among them and the prime bank. But First Union took care of the whole thing for Connie Fraley, treasurer of the $21-million (in 1994 sales) operator of eye clinics based in Winter Park, Fla. The bank suggested various out-of-state banks and, once they were selected, filled out the paperwork. Leaving no stone unturned, First Union went so far as to call the selected bank branches to determine which were most conveniently located for American Ophthalmic's offices. "This," says Fraley, "is the most unusual banking relationship I've ever seen."

Does it treat you as an individual?
Don't take it personally, but when you come down to it, a company is nothing more than its profit-and-loss and balance sheets. Well, a little more. Before he would accept even a loan application from rReynolds, a retail-store-fixture manufacturer in Lynnwood, Wash., the officer at Enterprise Bank, in Bellevue, asked rReynolds CEO Paul A. Abodeely an inordinate number of questions: Is your business cyclical? What's the composition of your accounts receivable? How do you depreciate your equipment? "They wanted to find out how much I knew about my own business," Abodeely says, "so they could determine whether I was worth lending to." After the banks voted yes, Abodeely applied his own criteria. "I decided that if they were smart enough to ask these intricate questions, they must be worth banking with."

Because the founder and CEO of the Merco Group, Erwin J. Merar, had had to deal with six loan officers in four years at his previous bank, he shopped around for a new bank that promised not only a long-term relationship but also to remain faithful even if his Milwaukee distribution company posted a bad year. Thus, he found Milwaukee's Norwest Bank Wisconsin. When his then $30-million business (it distributes pet foods, among other products) had the chance to purchase more merchandise at a rock-bottom price, Merar invited Norwest's president and vice-president to his company's offices, where he showed them a solid building, a polished operation, and a sophisticated computer system. In turn, the officers showed sufficient confidence in Merar to allow him to go over his credit line. Now that they know the way, the executives frequently drop by "just to stay informed."

Does it teach and advise?
To the extent that federal lending laws allow (and bankers' interest in clients dictates), not only do bankers sometimes serve as business counselors, but they sometimes virtually move right in, computers, spreadsheets, and all.

Tampa Bay Vending founder Marie Bartholomew "couldn't believe it" when a vice-president from First Union National Bank of Florida in Tampa asked to ride around Tampa in a company truck to bone up on the eccentricities of the vending-machine trade. Bartholomew's banker saw enough to "save our butts" many times over. Among the gray suit's contributions: when Tampa Bay Vending acquired another company, the bank made sure the new company's records were accurate; it provided on-site supervision while an old building was being reconstructed; it helped Tampa Bay Vending gain minority status; it counseled on exporting, advising the company to make sure overseas deposits were held in escrow and that products were insured while at sea; it coached an in-house certified public accountant on setting up a retirement fund for employees; and it showed Bartholomew's young son how to finance a gum-ball machine for personal profit.

A bank that takes that kind of interest in its customers can save the day. "It was kind of a start-up thing for us," says CEO Rodney Barstein of the way his family and lead partners Jimmy Filler and Janak Shah purchased Simply Fashion Stores, in Birmingham, Ala., out of bankruptcy in 1991. The 190-store retailer's books seemed impossibly tangled -- until AmSouth Bank of Alabama, also in Birmingham, sent over some software to straighten them out. The bank's financial models guided the company past such cash-hungry chimeras as pre-Christmas inventory buildup -- and into loan structures that would carry the stores' stock from September to January.

A couple of years after founding Collegiate Sports Design, a New Strawn, Kans., stadium-concessions business, Gregory Schuh wanted to go vertical by adding a souvenir-manufacturing arm. First National Bank of Kansas, in Burlington, showed Smith how to efficiently apportion his investment between the two business modes, and then set up a program to monitor subsequent cash flow "so that after we got the machines in, we'd have the capital to keep them going," Smith says.

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.

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.

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.

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!"

For as long as General MedVentures, in St. Louis, has banked at Mark Twain Banks, the St. Louis lender has summoned together groups of like-minded businesses and conducted sessions on such universal mysteries as cost cutting. The workshops are so habit-forming, confesses General MedVentures CEO Thomas Muchisky, that "they tie you to the bank." Those close ties paid off recently when General MedVentures (a manufacturer of medical equipment and a distributor of X-ray products with $70 million in 1995 sales) had a crack at stockpiling a batch of X-ray film at a bargain price that promised to increase margins months down the line. The company already had a $12-million line of credit but needed an instant $10 million more to pull off the deal. Getting the money was unlikely, since at that level of borrowing General MedVentures would have become the bank's largest single customer overnight. But the response from the loan committee was music to Muchisky's ears: "You've been with us for so long, so OK, we'll do it."

Does it find customers for you?
Banks are in a perfect position to act as a clearinghouse for enterprise, actively bringing businesspeople together. Chemical Bank in Rego Park, N.Y., sponsors breakfast and lunch gatherings of middle-market entrepreneurs like Tony Racioppo, at which more than ideas are exchanged. The swapping of business cards spawns "great networking opportunities," says Racioppo, CEO of Security Delivery Service, in Long Island City.

A science museum in Southern California uses Union Bank, the same Woodland Hills, Calif., institution used by garment manufacturer Flap Happy, based in Santa Monica. When the bank found out that the museum's gift store was gearing up for a line of clothing, it sent the store to see Flap Happy founder Laurie Snyder, who ended up selling some hats in the store.

Not only did First American Bank, in Nashville, lend $80,000 to Richards & Richards founder R. Stephen Richards in the early years of his Nashville record-storage service, but later it also shored up his ability to pay it back by signing on as his biggest customer.

Does it send you searching?
Bankers volunteer to reformulate your accounts for maximum yield and minimum interest. Banks publicly 'fess up to their mistakes. Loan officers travel all day to get to your plant, park themselves at construction sites to supervise progress, and ride around in company vehicles to study your operation. Presidents grant loans over coffee and greet you in their own lobbies. Lenders play matchmaker between you and your next customer. Credit formulas let you borrow against future sales or even on pure faith. Pinch yourself, but it's true: commercial lending institutions are actively wooing small companies.

On the other hand, this is no mass redemption. Nothing puts a kinder face on the country's lending institutions than easy money -- but why cavil? If your banking partner isn't up to making the accommodations illustrated here, there are plenty more that are. It's a buyer's market out there, a time for small businesses to comparison shop with uncharacteristic confidence and boldness. So kick some lending-provision tires, test-drive some banking services, turn the dials of bank-to-business communication, and sound out fees. But these auspicious times aren't going to last forever. So take action soon, before the inevitable return of tight money blinds bankers' eyes once again to the rewards of small-company growth.

Research assistance for this article was provided by Jerry Useem and Brac Selph.


To find CEOs with horror stories about their banks, you don't need a very large survey pool. If you talked to Jim Matras of Interstate Transportation Services, in Madison, Wis., for instance, he'd tell you how his former banker fell asleep during a one-to-one meeting.

Ask Adrian Lugo about his bank, though, and the accolades might continue for the better part of an hour. The owner of Lugo Construction, just outside Seattle, will tell you how his banker's business advice has been more valuable than any professional consultant's. And how his banker taught him how to speak bankese. And how this banker -- a 30-year veteran at $16-billion Seattle First National (Seafirst) Bank, in Seattle -- thinks and acts like a small-business person.

Yes, outstanding banks and bankers actually do exist. Lugo says his Seafirst "relationship manager" of 10 years, Glenn Yamada, has been a key reason for his general contracting firm's 10-fold growth in as many years. Besides extending Lugo a $500,000 line of credit, Seafirst has granted him several six-figure loans on short notice. (Once Yamada got him $110,000 within a day.)

Yamada is part of Seafirst's middle-market division of 6,000 companies, meaning he deals only with businesses comparable in size with $20-million Lugo Construction. Yamada's experience with companies going through similar growth is key, says Lugo, because it allows him to warn Lugo about potential problems before they arise and to suggest management solutions. Recounts Lugo: "Glenn told me ahead of time, 'It looks like you're entering a phase here where people are going to start head-hunting your personnel -- you'd better make sure you have a good program for your key people.' And sure enough, it started happening." Lugo put together a new benefits package just in time to persuade two crucial employees to stay.

Yamada also told Lugo that his company had reached the size at which friends would start asking him for loans, and that some of those loans would inevitably go bad and drain his cash flow. "And sure enough, it started happening." Lugo now rarely lends money.

Another time, Yamada warned his client not to do business with two companies whose creditworthiness was questionable. This time Lugo ignored the advice and got burned. "I listen a little more now," he says humbly. In general, Yamada praises Lugo for his ability to listen: "Despite being a very successful and well-thought-of CEO, he retains the humility that he started with. He abides by all of the advice that he garners."

And Seafirst gives him plenty of it. "Education is a big part of what Seafirst offers," Lugo emphasizes. "I've learned an amazing amount from the people there." When he offhandedly mentioned that he was thinking about doing some international sales, Yamada set up a lunch with an international banker who went through all of the ins and outs -- "things I had no knowledge of," says Lugo. Another time, Lugo remarked that he was having trouble managing cash: "Bingo, Glenn set up another meeting with money experts, who taught my bookkeeper how to do it." Then Lugo wanted to buy another business: "Bingo, another meeting."

Meanwhile, Yamada updates Lugo on building and economic trends, goes over his financial statement with him monthly, and suggests to him when and when not to borrow. "Glenn is what bankers used to be," declares Lugo. "Bankers used to be businesspeople who lent money. Now the image of a banker is of someone who knows how to process paperwork but who knows nothing about your business or about business in general."

Although Yamada can talk business, he has also helped his client talk banking. He encouraged Lugo to take a Seafirst-sponsored class on how banks look at a company's financial statement, which helped Lugo speak the bank's own language. "You don't really understand what bankers are talking about, or why they won't say yes to a loan, unless you speak bankese," he claims. "I didn't speak bankese before. I speak it now." As a result, Lugo can frame his requests and format his numbers "in a way that makes the bank more comfortable and more friendly to my packet."

The tight relationship between Lugo and Seafirst includes some mutual back-scratching. Lugo steers promising young companies toward Seafirst. Yamada gets Lugo on the bidding list for bank construction projects. (He's done several remodelings and built a branch office.) All the while, Lugo regularly turns away suitors who offer to slash his interest rates or boost his credit line. "Seafirst makes a lot of money off me," he reasons, "but it also teaches me how to make a lot of money."

-- Jerry Useem


Here are 26 lenders that stand by their customers

AmSouth Bank of Alabama

Birmingham Main Office

P.O. Box 11007

Birmingham, AL 35288


Chemical Bank

95-25 Queens Blvd.

Rego Park, NY 11374


Enterprise Bank

Bellevue Branch

11225 Southeast 6th St.

Bellevue, WA 98004


Fidelity Bank

7600 Parklawn Ave.

Edina, MN 55435


Fifth Third Bank of Northwest Ohio, NA

337 South Main St.

Findlay, OH 45840


First American Bank

Main Office

First American Center

Nashville, TN 37237-0510


Firstar Bank Madison

1 South Pinckney St.

Madison, WI 53703


First Commercial Bank of Tampa

4600 West Kennedy Blvd.

Tampa, FL 33609


First National Bank of Kansas

600 North 4th St.

Burlington, KS 66839


First Tennessee Bank

206 North Main St.

Greenville, TN 37745


First Union National Bank of Florida

Florida -- Jacksonville

225 Water St.

Jacksonville, FL 32202


First Union National Bank of Florida

Commercial Banking

100 South Ashley Dr.

Tampa, FL 33602


First Union National Bank of North Carolina

First Union Capital Markets

One First Union Center

301 South College St.

Charlotte, NC 28288-0735


Franklin National Bank

of Virginia

1421 Prince St.

Alexandria, VA 22314


George Mason Bank

11185 Main St.

Fairfax, VA 22030


Imperial Bank

Santa Clara Valley Regional Office

226 Airport Pkwy.

San Jose, CA 95110


Los Alamos National Bank

P.O. Box 60

Los Alamos, NM 87544


Mark Twain Banks

Commercial Finance Division

12140 Woodcrest Executive Dr.

St. Louis, MO 63141


NationsBank NA

Professional & Executive Banking Division

7316 Wisconsin Ave., 2nd Floor

Bethesda, MD 20814


New Canaan Bank & Trust Co.

208 Elm St.

New Canaan, CT 06840


Norwest Bank Wisconsin, NA

Main Office -- Corporate Banking

100 East Wisconsin Ave., Suite 1400

Milwaukee, WI 53202-4101


Park Bank


330 East Kilbourn Ave.

Milwaukee, WI 53202


Seafirst (Seattle First National)

4th & Madison

1001 4th Ave., 4th Floor

Seattle, WA 98154


State Central Bank

601 Main St.

Keokuk, IA 52632


Union Bank

5855 Topanga Cyn Blvd.

Woodland Hills, CA 91367


United Bank of Michigan

2620 Horizon Dr., Southeast

Grand Rapids, MI 49546