Big Banks Go Serenading : Large institutions launch campaigns to woo accounts from small firms.
The days of small-business owners timidly approaching big bankers with hat in hand appear to be over. Big banks are aggressively wooing small-business owners, openly acknowledging that small business is where Southern California’s--and the nation’s--real economic growth lies.
Bank of America, the state’s largest bank, formed a small-business marketing group last summer. The group created the “Small Business Alliance” program, automatically enrolling about 340,000 small-business account holders in April. Members can take advantage of discounted banking services such as payroll services, a toll-free advice hot line, a quarterly newsletter, seminars and reduced rates on products and services such as car rentals.
In response to B of A’s marketing campaign, nearly every other major bank has stepped into the fray, entering a market historically left to the smaller, independent banks. This sudden interest in small-business clients amuses many executives at smaller banks.
Ben Crowell, president and chief executive of Laguna Hills-based Eldorado Bancorp, has been watching the marketing campaigns with interest.
“So far, we haven’t seen any effect,” said Crowell, who was one of the founders of the 17-year-old bank, which has five branches in Orange County, two in Riverside County and one in San Bernardino County. “We still feel as an independent bank, we have closer ties to the smaller-business person than the larger banks.”
Neighborhood Banks Preferred
Crowell, whose bank has assets of about $250 million, said smaller banks watched their loan business increase when the bigger banks began establishing regional loan approval centers a few years ago. The rationale for such centers was that loan losses could be reduced if lending authority was taken away from the branches. But, Crowell said, small-business owners who were forced to travel far and deal with more bureaucracy, instead turned to their small, local bank for help.
Now it appears that the big banks have figured out that most small-business owners prefer to deal with a neighborhood institution. And in response, the big banks are sending more senior executives with lending authority back into the branches.
“We want better and more experienced bankers to serve small-business owners,” said Steve Carpenter, a former executive vice president at Wells Fargo who was brought in as a vice chairman in charge of Security Pacific’s new small- and mid-sized business program, known as middle-market bank.
Under Carpenter’s leadership, the new group is marketing a line of services to companies with sales between $2 million and $25 million.
Carpenter said Security Pacific’s branch executives will not only have loan approval authority but will act as business consultants for their small-business clients.
“The small-business person is a tough one to finance,” Carpenter said. “We want to make darn sure we pick bright people and marry them up to the right CPAs, lawyers and partners.”
Scores Open Every Day
Carpenter and his colleagues at other banks said they are anxious to tap into the businesses that represent the real job growth in California.
He said there will probably not be any huge new aerospace companies moving into town, but there are scores of new small businesses opening every day. (A recent Dun & Bradstreet survey revealed that nationwide, small businesses will create 1.5 million new jobs this year--accounting for 56.6% of the total 2.6 million jobs.)
To better reach these growing companies, First Interstate Bank of California has six regional business banking centers, each serving as home to a team of commercial lenders, according to Patricia Bracher, vice president and business banking coordinator for First Interstate’s Metro Los Angeles division.
“We figure there are about 21,000 companies with sales in the $1-million to $10-million range in what we consider the metropolitan Los Angeles area,” Bracher said.
She said First Interstate is following the lead of the independent banks “which have done a superb job in relationship banking.”
“We have the same approach, but we can offer a full range of services that an independent bank cannot,” Bracher said.
One new First Interstate product is a Business Advance Line, which is a secured or unsecured line of credit ranging from $25,000 to $350,000. Business owners can write checks on their credit line without having to apply for individual loans.
Executives Reassigned
Sanwa Bank California is also pursuing small-business clients but does not plan to package the services, according to Margaret Merrett, vice president of corporate communications.
“Many of our business services are geared toward the small-business person,” said Merrett. Among them: a simplified pension plan, tax deferred retirement plans and a full range of cash management services, including payroll and wire transfers. Sanwa also provides courier service for non-cash items, she said.
At Union Bank, two executives have recently been reassigned to help clients apply for Small Business Administration loan guarantees, according to spokesman Mike Colwell.
“We have always paid attention to small-business owners,” Colwell said. “They have always been of major importance to us.”
He said every one of Union’s 167 branches has commercial lending authority, which is a “real plus” for small-business clients who need a quick answer on their loan requests. Meanwhile, Patricia Hudson, vice president in charge of small-business marketing for the Bank of America, said the Alliance program has been very well received.
“We see ourselves as a champion of small-business clients at the bank,” Hudson said. She said new services such as a free business banking analysis are not only helping current customers but drawing in new ones.
“I’m so pleased with the branch support for all of this,” Hudson said. She said the branch managers are setting small-business sales goals and working hard to meet them.
“Small-business clients tend to be among the most important clients at any branch because they have deeper relationships with their bankers--and they usually have both their business and personal accounts in one place,” Hudson said.
Money Store Tops L.A. List of SBA Lenders
According to the Small Business Administration, the Money Store Investment Corp. in Encino led the list of the largest SBA lenders in Los Angeles last year. The Money Store funded 55 loans for a total of $17.4 million. Next in line was Government Funding in Los Angeles, with 72 loans totaling $15.7 million. Three independent banks ranked third, fourth and fifth; Mechanics National Bank in Paramount, Mercury Savings & Loan in Glendale and Mid City Bank in Los Angeles.
