When Kevin Clark set out to find a small-business loan, he resolved to leave no stone unturned. The president and co-owner of Edge Software Services, Warrenton, Va., called on no fewer than 10 banks to see what they could offer.
He ruled out one bank because it seemed too big, another because it was too small. Then there was the bank that had no branches nearby, and one that charged noticeably higher rates. Still another was oddly apologetic about its own lending record.
When Mr. Clark finally picked a winner-George Mason Bankshares-the bank suddenly agreed to be acquired. Mr. Clark, contending the loan offer changed as a result of the deal, quickly returned to one of the other banks and coaxed it into improving its offer. Richmond, Va.-based Crestar Financial Corp. proceeded to make the loan, and just in the nick of time.
Mr. Clark's odyssey illustrates the lengths to which small businesses are increasingly going to find the right bank-and their willingness to pit one bank against the other. It also shows what it takes for a bank to win the business of this kind of customer.
"The banks need to sell themselves," Mr. Clark said. "That's what separates the winners from the losers. The winners really want our business, not just the loans but also the deposits and credit cards."
Mr. Clark's cash crunch began in January, even though business was booming for Edge, which installs and services software programs for banks.It was then a three-year-old company with 15 employees. Over the next six months, Edge added another 17 employees and sent them out to install software programs for banks.
The problem was that Edge had to hire new employees to do a job before it was paid for completing other contracts. The company's revenue wasn't keeping up with payroll expenses.
So Mr. Clark applied for a loan with a community bank where Edge had a deposit account. The company, however, had no tangible assets to use a collateral-not even an office. All the software consultants worked at their customers' offices or out of their homes.
Mr. Clark said the community bank never responded to his loan request. Discouraged, he hired Rich Russakoff, president of Bottom Line Consultants, of Richmond, Va., to help him apply for a loan.
They compiled a loan application package that included a business plan, a history of the company, three years of business tax returns, financial projections, biographies of the owners, and their personal financial statements.
Then they set up meetings with Washington-area bankers during the first week of August. They applied for a loan at five community banks, three Middle Atlantic regional banks, and two superregionals.
Mr. Clark said he really wanted more than just a loan.
"We were looking for a true relationship," he said. "We want the bank to work with us so that when we come back to them again, they will understand what we need."
He said he was impressed with the sales skills of a lender from Washington-based Franklin National Bank. The lender aggressively courted Mr. Clark and even asked another Franklin customer in the software industry to endorse the bank's services.
Franklin gave Mr. Clark a loan offer, not just a proposal, in three days. But Mr. Clark said he decided not to go with Franklin because the closest branch was 20 minutes from his home and it would take too long to make deposits. A Franklin spokesman said the bank plans to expand its suburban branches.
Mr. Clark said he was also impressed with a lender from NationsBank Corp.; the banker took Mr. Clark and Mr. Russakoff to lunch and offered them tickets to an Orioles baseball game.
"I was surprised," Mr. Clark said. "They really want to do business."
But Mr. Clark said he decided against NationsBank because he didn't think such a large bank could provide the personal service he wanted. A NationsBank spokeswoman said the bank couldn't address those concerns because the entrepreneur never mentioned them during their meetings.
Meanwhile, he said, another bank he visited was too small to handle a $750,000 loan. And another lost because its loan officer began the meeting by apologizing for the bank's past Community Reinvestment Act problems.
Eager to return to running his business, Mr. Clark was happy to hear George Mason's offer. He said the bank promised him the lowest rates and fees and most palatable covenants. What's more, he said the bank offered him $100,000 in corporate credit cards.
Ready to sign the documents, Mr. Clark called the bank on Sept. 11. Mr. Clark maintains the loan officer told him George Mason had just agreed to be acquired United Bankshares of Parkersburg, W.Va, and could now offer his company only $450,000.
"It was like a slap in the face," he said. "I thought the banks understood that we actually wanted to get what we were offered." George Mason, for its part, disputes Mr. Clark's description of events. Kevin DeCoste, chief operations officer at George Mason, said the merger with United had no effect on any of the bank's lending decisions, and the bank never said it would lend $750,000.
"Our decision was based on a review of the application," Mr. DeCoste said. "United had no influence."
Mr. Clark said Edge needed the money to pay its employees in four days. But he was so upset about being offered less credit than he expected that he turned down the offer for $450,000.
"My principles took over my brain," he said.
Mr. Clark then called Crestar. He had been impressed that Crestar sent three lenders to the initial meeting, but bank had slightly higher fees and tougher terms. Specifically, it required the business owners and their spouses to guarantee the loan.
Still interested, the Crestar lender offered to reduce the fees and make the loan without the spouse's guarantees-and then put approval on a decidedly fast track.
Within two days, Crestar approved an emergency loan for $200,000, which allowed Edge to make payroll on Monday. Mr. Clark said the Crestar lender restructured the loan on Tuesday to give Edge a $750,000 credit line, $100,000 in corporate credit cards, and a $200,000 term loan to open a satellite office.
"We are able to differentiate ourselves by being responsive," said Maribeth Schmersal, vice president for Crestar Bank's commercial division. "If we have all the information we need, we can get the money out the door."
Said Mr. Clark: "I was shocked she could get everything done that quickly."
He said Edge will be a loyal Crestar customer. Although he is grateful for the cash, Mr. Clark said he still expects more than just a loan from his bank.
"I want a relationship," he said. "If she looks at our quarterly reports and sees something, I want her to tell me. I want her advice on where we are going as a company."