Giving Credit to the Little Guy : A Growing Sector Has New Suitors

Small businesses, courted aggressively the last few years by big banks, have found new suitors in credit and financial services companies.

Last month, American Express unveiled new credit lines and a $100,000 equipment leasing program geared to small business. The company also announced the opening of prototype one-stop small-business centers in Woodland Hills and Phoenix.

Meanwhile, Merrill Lynch is touting its 18-month-old Business Financial Planner program. The program, used by more than 5,000 small businesses, compares companies with others in their industry, analyzes their financial “life cycles” and recommends appropriate steps at each stage.

For example, the brokerage might suggest ways in which growing companies can improve cash flow, how mature companies can provide employee benefit plans or how older companies can devise liquidation or succession plans.

Merrill Lynch also teamed earlier this year with the National Assn. of Women Business Owners to offer association members easy access to financial planning.

And TRW, via two new low-cost CD-ROMs from Serious Business Software, now offers its nationwide credit data to small businesses for about $200 per disk.

“We are getting solicited by everybody that wants to do business with small business,” said Scott Hauge, vice president of the 100,000-member California Small Business Assn.

“What the [financial services] companies are looking at, I think, is where they are going to be in the future,” Hauge said. “There’s no growth in the large companies, so they’ve got to figure out how to get into the small companies.”

The new programs are an expansion of the marketing blitz aimed recently at small businesses. Within the last few years, small-business owners have found themselves much sought after by all sorts of postal delivery and copying service firms, utilities and phone companies. Even banks, which in the past couldn’t be bothered, began devising small-business lending campaigns.

But billion-dollar financial services companies were slower to react.

Judith Luther-Wilder, co-chief executive of Women Incorporated, a nonprofit organization dedicated to improving capital access for female business owners, said she had a hard time convincing Wall Street companies that they could profit by designing programs for small business.

But in late 1995, after U.S. census data and a Dun & Bradstreet report indicated that female business owners were 8 million strong, had $2.4 trillion in sales and employed more workers than Fortune 500 companies, attitudes began to change and brokerages began to come up with small-business programs, Luther-Wilder said.

“Less than six months after we went into business, it was as if the world had changed,” she said.

The interest in small business expanded as more census data rolled out this year on the strength of Asian- and Latino-owned businesses. Steve Alesio, president of Small Business Services for American Express explained the trend this way:

“For a large company to grow, you need to identify the growing sectors. Small business is a big part of the American economy, with 50% of the private-sector output and 80% of new jobs.”

“We will be winners if they’re winners,” said G. Stephen Thoma, director of business financial services at Merrill Lynch.

Despite the new attitudes, Hauge warned that some of the programs offered by brokerages and credit companies may not actually be designed with small business in mind. Some are simply born in corporate offices with little input from small-business owners, or a repackaging of old corporate-oriented products.

“You have to target your market,” Hauge said. “A small business with 100 employees is different than one with five. Are they targeting five or 100 or putting them all together?”

Luther-Wilder said her organization seeks products tailored to members, such as cash-flow financing instead of collateral loans or investments of less than $10,000. These days, finance and credit corporations seem eager to oblige.

Said Luther-Wilder: “I think they are really aware that business as usual isn’t going to work for them in terms of attracting the very small but very promising businesses.”