Charles Brown, the chairman and chief executive of Insignia Bank in Sarasota, Fla., got a call last week from a well-known area business whose regional bank had begun charging it higher loan rates.
The lending opportunity for Insignia, Mr. Brown said, resulted from a marketing campaign with a simple message: that the community bank is open for business.
The campaign included a print ad with the tag line, "Yes, you can still get a loan." Insignia employees backed up the ad by chatting up potential clients and appearing in a local news story about banks that are still writing loans.
"We think of ourselves as human billboards for the company," Mr. Brown said.
Several banks around the country are using such tactics to capitalize on a growing perception among small businesses that they cannot gain access to credit on affordable terms, if at all.
A survey that Greenwich Associates LLC is to release today says that more than one-third of 670 companies contacted in mid-December reported higher fees and rates compared to six months or a year ago.
Of these, nearly half said they feel their bank is taking advantage of them. The Stamford, Conn., research firm said that these businesses believe the higher rates reflect the bank's health, not the health of their businesses.
Many of these customers feel jilted by their longtime lenders and would leave if offered the opportunity, said Steve Busby, a managing director at Greenwich Associates.
"They are at their tipping points," he said. "There are a lot of costs in switching banks, but right now companies will switch if they can find a better option."
To be sure, community banks have long claimed to fill the credit void in times of trouble.
The problem now is that many customers think they have no alternatives, Mr. Busby said, so banks that are bullish on lending must spread the word.
Three-quarters of the businesses Greenwich Associates surveyed said they were concerned about securing the financing they need in the coming year.
"They think, if their historical bank wouldn't lend to them, why would anyone else?" Mr. Busby said. "We are going to see a lot more attrition once the qualified borrowers and the hungry banks connect with each other."
Last week, California Bank and Trust, a San Diego unit of Zions Bancorp., started a campaign with the tag line, "You have a business to run. We have money to lend."
The $9 billion-asset bank ran print ads in several state business publications and a radio spot during afternoon rush hour.
"There has been a fair amount of talk and coverage recently about the lack of availability and access to credit," said Steven Borg, a senior vice president and the corporate marketing director at California Bank. "We want to counter that message. We are doing our part to utilize the capital we have received" through the Treasury Department's Troubled Asset Relief Program "to lend to legitimate and creditworthy businesses." (Zions, based in Salt Lake City, got $1.4 billion in Tarp funds in November.)
Mr. Borg would not disclose any quantitative goals of the campaign but said his bank has "unused borrowing capacity" and is looking to "expand the number of relationships" with businesses and individuals.
Mr. Brown at Insignia said the local business that called him last week was shopping for a new lender because "their bank has deemed their industry as riskier." He would not identify the company or its industry. "They have been aware of us," he said, "so there might be a deal for us on the horizon."
Last year the $104.4 million-asset Insignia nearly doubled its loan portfolio, which is dominated by commercial and industrial and commercial real estate loans, to $80 million. Mr. Brown said the company plans to add $40 million this year. It closed $4 million of loans last month, he said.
"We are lending quite rapidly, actually," he said.
Despite the Greenwich Associates survey's findings on higher rates, Mr. Brown said Insignia is charging customers 25 to 50 basis points less for loans, on average, than a year ago. It would charge even less than that if it did not have to pay such high rates on core deposits.
Despite the rate reductions, Insignia has had a hard time finding creditworthy borrowers, which is one reason it started the campaign. Mr. Busby of Greenwich Associates said such prospects are up for grabs right now. "There are plenty of qualified borrowers who are feeling abused and would switch gladly," he said. "It might be harder to find those qualified borrowers right now, but the odds of converting them are at an all-time high."
Pricing might not be the only reason for a switch, though. Diane Wishnafski, the director of retail and business services at the $8.2 billion-asset NewAlliance Bancshares Inc. in New Haven, Conn., said businesses are more concerned about access to their lines of credit than they are about rates right now.
"They fear losing their line or seeing a delay in its renewal — or anything that has the potential for great impact on their business," Ms. Wishnafski said. "That's what is keeping them up at night. … They want to trust that as they face the economic headwinds, there won't be any surprises from their bank."
To tap into that sentiment, NewAlliance is "pounding the pavement" for new relationships, as well as using its existing client base for referrals, she said.
The company also has started print ad campaigns, including one in the form of an open letter from the company's president and chief executive, Peyton Patterson, that "definitely heightened the interest of companies looking to switch," Ms. Wishnafski said.
The Greenwich survey also found that some customers understand why banks are charging higher rates in the current economic environment. Hence, it might be enough for a bank to demonstrate reliability in order to win business from competitors.
"I think some will switch for other things than rates," Mr. Busby said. "This is the time to find out if your bank is really by your side."
