Small-business lenders at a Consumer Bankers Association conference last week turned their field into a game.

The bankers split into teams. Those on one side pretended to be nonbank lenders seeking more of the small-business market; those on the other acted as regional bankers defending their turf. The teams brainstormed to develop strategies.

They turned out to be similar strategies.

Both teams said they would use computer data bases to identify prospective customers and learn which current customers are the most profitable.

"Nonbanks capture 50% of the revenue from small business but get more of the net income, because they are focused on the more profitable products," said Charles Wendel, a consultant who led the exercise.

Bankers said that to compete in small-business lending they would need a supportive chief executive officer and a good sales force paid by commission.

They also said they should offer a tailored menu of small-business products, quick turnaround on lending decisions, and computer banking services.

But when discussing small-business products such as sweep accounts, one banker quipped: "We sell that defensively. We wait for one of our competitors to offer it and then we go out and tell our customers about it."


Small-business banking is still an orphan at many banks, according to Nancy Bush, a manager at Brown Brothers Harriman & Co.

Ms. Bush said more than half the bank investor-relations managers she contacted could not name the person responsible for small-business banking at their bank. She encouraged small-business lenders to toot their own horn within their banks and make sure that their departments get the resources they need.

"We all know that in a bank viability equates to money," Ms. Bush said. "Look at cutting costs-but first find out what your customers want, and satisfy those needs."


Joseph Wahed, former chief economist for Wells Fargo & Co., said the outlook is sunny for the national economy and small-business banking. Mr. Wahed said the economic recovery, which is entering its seventh year, has been driven by consumers' use of credit and the rising stock market.

So bankers should watch for a credit problems in small business and be wary of political instability that could cause the stock market to drop, Mr. Wahed said. "Even though small businesses are showing healthy balance sheets, there is still is a trend toward delinquencies."


Banks should analyze their small-business lending efforts in areas with low to moderate income, said Carol Parry, Chase Manhattan Bank's executive vice president for community development.

Under the revised Community Reinvestment Act, banks must report data on small-business lending. Regulators are supposed to get the information this month; it's to be available to the public by the end of the summer.

Chase recently created a program to lend to small retailer businesses in New York using an Small Business Administration program that provides a 50% loan guarantee.

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