PASADENA, Calif. - Tucked away in a windowless building in the center of this Los Angeles suburb is Bank of America's secret weapon.
It is here that the bank processes hundreds of small business loan applications daily. Through a team of credit analysts, loan processors, collectors and clerks, the center is the hub for processing loans from the bank's affiliates in Arizona, California, Hawaii, Nevada, New Mexico and Texas.
Janet Garufis, a senior vice president and former Security Pacific banker who manages the center, said the group's chief advantage is that it can book small business loans "faster, cheaper, and better" than most of its competitors. Since starting this center in July 1992, she said loan processing volume has increased four-fold.
"We know how to make a lot of loan decisions very quickly," she said. "If I spend a lot of time on a loan and don't book it, then that is pure expense to me."
While making a credit decision on so many loans on a daily basis may seem like a sure way to increase defaults and delinquencies, this is not the case, according to Ms. Garufis. She said that despite starting this assembly line process during one of the worst recessions in recent memory for the California economy, the bank's loss performance is better than those competitors who underwrite each individual small business loan the traditional way.
"Our experience has validated what we believed to be true, and that is that our small business customers behave very much like consumers," she said. "These are by and large consumer loans."
And that means underwriting small business loans using the same assembly line approach the bank uses to underwrite consumer loans.
"Bankers get really sidetracked thinking that what they do is special," she added. "Part of it is that they are very married to their way of doing things."
Getting away from the traditional approach to serving the small business market is something bankers across California are looking to do. For Bank of America, that means quickly processing small business loans and tailoring service to the needs of the customer.
Meanwhile, at Bank of Tokyo's Los Angeles-based Union Bank subsidiary, senior vice president Honoria Vivell said the affiliate prides itself on personal service to the owners of small companies.
With more than 50,000 small business relationships statewide, Union Bank also uses centralized loan processing, credit scoring and branch delivery systems for its smallest customers. But she said the bank tries to give individual attention to each of its customers, even at the branch level.
"Our philosophy is to have a banker for each customer," she said.
On the other hand, Sanwa Bank is attempting to distinguish itself by marketing its products more effectively. The bank is doing this by assigning managers to oversee specific deposit and credit products, said Dougley Stewart, an executive vice president with the bank's specialized banking division.
"It is important that somebody own these products," he said. "We put the same emphasis on serving small business as we do on bigger businesses."
But Bank of America has also found success with its line of standardized products. In December, the bank introduced a new credit line, known as Express Line, for loans between $2,500 and $10,000. Without even marketing the product, the bank was receiving 90 calls a day. Today, the bank is receiving and processing 250 applications a day for this product alone.
The mix of deposit and loan products is what the bank is after. "It's the deposits that bring in the income," Ms. Garufis said. "Though lending to this market used to be a loss leader, we've found a way that makes money on a stand-alone basis."
