Bucking recent trends in small-business lending, a North Carolina-based bank is making money-the old-fashioned way.

BB&T Corp. has decentralized its loan approval process, giving regional managers high lending authority and charging them with knowing customers and their markets very well.

The retro approach contrasts sharply with practices at the majority of big bank players that are moving toward increased automation and centralization. But a traditional approach still resonates with the majority of BB&T Customers, said Lynn Harton, senior vice president of small-business banking for the $27.3 billion-asset bank, based in Winston- Salem, N.C.

"All the research continues to show that people want to deal with people and they want to deal with decision makers and that is our strategy," he said.

This old idea raises the eyebrows of peers at other banks who embrace more automated, "loan factory" approaches, Mr. Harton said. "The people running the factories-they tend to think we are kind of crazy."

BB&T boasts 85,000 small-business customers and $1.4 billion in loans - and counting.

The bank's total loan portfolio is $8 billion. He acknowledges that the biggest challenge will be mixing the old with the new as the businessgrows.

"I think they are on a limb-but it's a good limb," said Allan Bloomquist, senior vice president of Oxxford Information Technologies. "If they have very entrepreneurial, fast, good, and not bureaucratic decision- making, they can definitely succeed."

That's all part of the strategy, Mr. Harton asserts. He said BB&T's plan embraces just enough new technology and products to enhance a proven way of doing business. Without adding these elements, such a strategy would eventually fail, even at small banks, he said.

Two years ago, BB&T began laying its groundwork for its hybrid approach just as it was merging with Southern National Corp. Like BB&T, Southern National had successfully built its small-business lending traditionally, Mr. Harton said. Both banks empowered branch employees and took a flexible approach in going after the same small-business customers. About the only change was that Southern National employees were pleased to get even more local authority than they had, he said.

BB&T created 16 regions, each with a president. The presidents were given the authority to make loans up to $100,000, with an aggregate loan authority of several million dollars, Mr. Harton said. In just 48 hours, and with two signatures, a loan can be approved, he said.

Along the way, the bank wants customers to know they can learn from their bank contacts. Mr. Harton said loan officers are encouraged to be a consultative resource for the small-business customer. By sharing industry information and even contacts, the bank can enhance its value to the customer, he said.

Mr. Harton believes BB&T's biggest challenge is building its business traditionally at a competitive price at the same time as the bank gets bigger through mergers and growth.

Mr. Bloomquist said this dilemma is one of the major concerns for banks taking the approach. Whereas a centralized lender can just set up a new computer for a new market, a traditional lender needs additional people. But studies show small-business customers who like the personal touch are willing to pay for the privilege, Mr. Bloomquist said.

To keep costs reasonable, the bank decided to use credit scoring in a limited way for difficult and unusual loans, Mr. Harton said. The bank says about 20% of its loans fall into that category. But, BB&T doesn't want to lean more heavily on scoring. "If our people aren't empowered to make a difference, we start looking like every other bank in town," he said. "We can't out-NationsBank NationsBank."

An over-reliance on scoring does cost some banks good business, Mr. Bloomquist said. A bank he has worked with was ruling out too many good loans.

He said an outsider might look at credit scoring or PC banking and see huge savings on the horizon. "Our experience with what seemed to be very- low-cost delivery channels is that they are not always as low-cost as they appear."

For instance, it is expensive to build a PC banking system, Mr. Harton explained. BB&T paid what it projected for its new system and the number of customers already using it exceeds industry averages, he said. But customer service costs are tremendous, he said, and sometimes instead of just taking traffic out of the branch, the new technology just creates a new area of traffic, he said.

Still, these new products are a necessary part of BB&T's strategy, he said. In addition to the PC program, the bank introduced a Business Choice Account with a credit feature built into it this summer.

In a new step for his unit, 100,000 small-business prospects will receive a mailing from BB&T next month, Mr. Harton said.

The mailings point to BB&T's local decision-making, brand image and products to distinguish it from competitors. Underlining the bank's commitment to local control, each region will do its own personal follow- ups to the mailings and be available to consult with small-businesses, he said.

BB&T will monitor the results of this experiment closely, he said. BB&T's local presence is growing rapidly. After a recent acquisition of United Carolina Bancshares, BB&T now boasts 552 branches in South Carolina, North Carolina, and Virginia. Mr. Harton said.

"We must work overtime to build systems to support those (branch) people," he said. "If we fail, it's because we didn't support those people- not because people don't want it."

"We have no plans to put together a factory," Mr. Harton added.

If BB&T tried to do that, it would have to rip experienced lenders with many contacts out of the field and deposit them in a central office, he said.

"There's really no turning back," Mr. Harton said.

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