Alan R. Waters, chief financial officer of a California computer company, is frustrated with bankers. Mr. Waters, a former economist at the U.S. Agency for International Development, said he didn't have much luck finding the financing from traditional banks that his small company needs to grow. "The bankers are still living in a never-never land where they act like they are doing you a favor by talking to you," said Mr. Waters, who works for DKA Computers. Business people like Mr. Waters are considered to be a new breed of entrepreneur who are more demanding of their bankers and know how to bargain for lower rates and better terms. They're part of a legion of executives who are leaving corporate America to start their own enterprises. The exodus is propelling savvy, highly-skilled managers into the ranks of smaller firms. Now, bankers are busily trying to beef up their product offerings to attract these customers and are trying to better train their employees to meet business owners' needs. "We see guys from Intel or other companies leave to start their own business," said Harry Kellogg, executive vice president of marketing for Silicon Valley Bank. "A lot of the new entrepreneurs have left larger companies and have true business experience." With a strong market for initial public offerings, the few corporate exiles with equity stakes in their companies see the potential to reap millions within a few years. In the beginning, those customers come to a bank with their own ideas about how to structure loans and negotiate interest rates, said Dan Kitzmiller, assistant vice president and manager of the business development group at Fifth Third Bank. Later, they seek higher returns by putting their deposits into investment or sweep accounts, he said. And then they demand retirement plans or medical savings accounts to help retain good employees. "The demographics of the market have forced us to gear up as a bank in terms of the products we offer and the people we have interacting with the customers," Mr. Kitzmiller said. The trend isn't confined to high-tech companies. Increased competition nationwide is forcing all business owners to become more financially astute, said Cole Martin, chairman and chief executive of First Security Bancorp's Farmers Bank and Trust in Clarksville, Ark. "I'm surprised about the number of customers in Jackson County, Ark., who understand how to negotiate their loans and talk about rates," Mr. Martin said. And not even executives at the biggest corporate behemoths are immune to the allure of entrepreneurship. Last year, the president of telecommunications giant AT&T Corp. left to join a start-up firm that handles high-speed data traffic, Internet access, and video links for businesses. Another AT&T executive quit to join Netscape Communications Corp. when it was still an unknown start-up. And just last week a top AT&T Internet executive left the company to work for a start-up that sends telephone calls over the Internet. When telecommunications giant AT&T cast off thousands of employees, the company offered them grants of up to $10,000 to finance their own businesses, relocate, or continue their education. More than 1,500 accepted the offer last year. Of course, few downsized executives will go on to create multimillion- dollar companies. Bank-ers should be cautious with people who get squeezed out of corporate America and hang out their shingles as independent consultants, said Kathleen McClave, a managing director at Washington-based Furash & Co. Those entrepreneurs look attractive when they leave their corporate jobs with large buyout packages. But then their direct deposit paychecks stop coming. They often use personal credit cards to finance business expenses, and if their businesses are not successful, they are left with thousands of dollars in debt, she said. Mr. Kitzmiller said banks need to be cautious when lending to one-person service providers or independent consultants. "They don't have a lot of fixed assets, and their overhead is considerably lower, but if things turn sour, they don't have a lot for a banker to grab onto," he said. However, the sophisticated entrepreneurs who start businesses that grow to millions of dollars in sales and scores of employees rank among banks' most coveted and highest-net-worth customers. And lenders say these customers are very demanding. "The very nature of the economy has changed, and they have to be smarter just in order to survive," said Mr. Martin, the Arkansas banker. "They don't feel the banking industry has changed. Bankers all wear suits and ties and have always been stodgy people." Mr. Waters, the California computer executive, said he is particularly startled by bankers' lack of sales and negotiating skills, especially in view of the torrid competition to serve small-business owners in California. Bankers frequently call to offer DKA a credit line, Mr. Waters said. But when he balks at a 14% annual interest rate, they immediately drop to prime plus two percentage points (currently 10.5%), rather than gradually reducing their offer. "The bankers in the firing line know what they are doing," he said, "but the moment you get beyond them it is shocking. They are comfy, not hungry like real business people are."

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