A panel of four entrepreneurs told 200 bankers here last week that they want more than money from banks.

They want faith, communication, and commitment. Or, in a word, respect.

Their message was the highlight of the American Bankers Association's small-business conference last Monday and Tuesday. The meeting also explored who was vying with banks for small-business customers and how they could be better, and more profitably, served.

One panelist warned banks not to forget the human factor in their race to automate small-business practices.

Banking means more than credit scoring and data base mining for many entrepreneurs, said Sandra Allen, founder of Kevric Co.; it means a human relationship.

"That relationship is disappearing, or so I hear, and that's very scary for me," said Ms. Allen, head of a professional services company based in Silver Spring, Md. "I look at my banker as my bank. If he jumps ship, I very well might go with him."

Lack of a close relationship drove another panelist out of a bank, he said.

Donald Henley, president of Henley-Meyer Associates Inc., a consultancy based in Wellesley, Mass., said he recently ended its relationship with its longtime bank - a large northeastern regional - to go to another institution.

The reason: The bank gave the cold shoulder to the consulting company after it suffered short-term credit problems, though it was again growing and profitable and paying off its loan.

"If they had looked at our deposit account, they would've thought that these guys aren't the deadbeats we thought they were," Mr. Henley said. The customer service representative didn't even ask why he was closing the accounts last year, he recalled.

Mr. Henley, who does some bank consulting, gave high marks to his current institution. But he professed astonishment at how many sales opportunities - for 401(k) accounts or cash management - his bank is passing up.

"Knowing what banks are trying to do, I'd say they're missing a lot," he said. "Banks have got to get their acts together."

If treated well, small businesses can be loyal to their banks, the panelists said, and entrepreneurs particularly value banks that have taken a chance with them.

For instance, Randy Rossler said, bankers looked at him as though he "had three heads" about five years ago when he was pitching his business, IntroKnocks Corp., which makes business-themed greeting cards.

But now that the company is off and running - and has been written up in Success magazine - some banks that had spurned him want his business.

Tough luck, he said.

"I'm not interested in them because they weren't there for me when I was starting out," Mr. Rossler said.


If bankers don't do a good job serving small businesses, nonbanks are more than happy to exploit the opening.

They're doing plenty of that now.

Michael J. Chagares, a managing director at Furash & Co., said nonbanks now control about 35% of small-business lending - a whopping 70% increase from three years ago.

"That's a large phenomenon in three years; before that, it had moved very slowly," said Mr. Chagares. He was presenting findings from a survey on what types of products small businesses need and when they need them.

Banks should watch out, warned Harry Hummel, a consultant at New York- based McKinsey and Co., because nonbanks haven't yet slaked their thirst for new business.

"They are aggressive competitors that have a lot of money and are in a lot of markets," Mr. Hummel said, "and they're interested in this market as well."

Mr. Hummel listed the top nonbank threats, including Merrill Lynch & Co., the biggest U.S. brokerage, which has $1 billion outstanding in small- business credit, he said.

"This is a long-range investment; these are expensive things to do," he said.


Every day, bankers meet entrepreneurs who, for a variety of reasons - ranging from the age of their business to its profitability - don't qualify for bank credit.

If they want those businesses as eventual customers, referring them to venture capitalists could be the answer, according to H. Kenneth Merritt Jr., a Burlington, Vt., lawyer. He encouraged bankers to facilitate contacts between entrepreneurs and "angels" - private investors - as well as other venture capitalists.

"To the extent you can facilitate entrepreneurial companies' access to capital," he said, "the company stands a better chance of remaining in your community and remaining to be financed by your bank."

Steve Stahey, a principal for MABSCO Capital Inc., said the Des Moines venture capital company gets many prospects from community banks as well as "a surprising number" from the Iowa subsidiary of Firstar Corp., Milwaukee.

But he told banks to be cautious about whom they send; he said he generally screens 260 applicants before finding one with a coherent strategy and solid market understanding.

"If there's one thing I can emphasize to you before sending a customer to a venture capitalist, it's to make sure they're capable of running the business when they have money," he said. "Most of the time, the last thing they need is more money. Usually, the first thing they need is a plan."

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