Banks train sights on small-business market

When it comes to commercial lending in Central New York, small business is the hot ticket -- at least that's the way it seems, judging from the level of attention banks are paying to small business.

As always, the smaller banks focus their commercial-lending activities on small businesses, but in the last 12 to 14 months, the level of attention that small business has been receiving from the big boys in banking has increased dramatically.

KeyBank has packaged software, services, and products together to be especially valuable and attractive to the small-business owner. Chase, too, is pursuing small-business customers with special services and a recently unveiled, simplified loan-application process for loans up to $35,000, reports Jack Webb, regional retail executive for Chase Bank.

Many of the banks in Central New York report that small-business loans are a growing piece of their commercial-loan portfolios. For KeyBank of New York, for example, small-business loans made up about 20.2 percent of its $3-billion commercial portfolio as of June 30, according to Bauer Financial Reports. And for OnBank, it was 17.5 percent of $500 million in commercial loans.

BSB Bank and Trust, of Binghamton, shows similar figures to OnBank, with a $584-million portfolio and $96.1 million in small-business loans (16.5 percent).

Glenn Small, executive vice president in charge of lending at BSB, has an idea about why banks are paying so much attention to the small-business market today.

"I think there is more emphasis on small business by most banks because they see that as a last bastion where they can add value -- individual attention and relationships with the customer. In most other areas, what had been traditional products and services in banking have become commodities. That hasn't happened yet with small business, and, although there are some attempts to make it more of a commodity, I don't think that it will ever completely be a commodity area of the business," Small says.

Small, however, does not see signs that the region's economy is improving dramatically and spurring an increase in small-business lending. "I think business owners tend to be a pretty optimistic lot, in general; otherwise, they wouldn't be in business in the first place. And it is hard to know really when the economy is at the bottom, but if we haven't reached the bottom and started up yet, I think it is close," he says.

Howard Sharp, executive vice president at OnBank, however, is confident that the economy is improving and adding momentum to small-business expansion.

"I think that there are a couple of reasons that we are seeing an increase in our small-business lending and that other banks are reporting it, too. First, over the past couple of years, the economy really has been pretty good, and small business has been a major contributor to that economic climate. But, also, a lot of banks, especially the larger banks, are publicizing their interest in the small-business market more, so they are getting more of the business," he explains.

Marine Midland's Edward Runte, executive vice president and district director, agrees. "Every bank in town is very interested in courting small business. That is where the most activity is," he observes.

When he looks at the larger economic picture, though, he sees good reason for paying attention to the small-business marketplace. "All the macro-economic figures I look at show that small business -- the businesses with annual revenues of $5 million or less -- is the fastest growing segment of the economy. You are not seeing much growth, if any, among large corporations, and little, if any, in mid-market companies," Runte says.

Building the small-business portion of commercial lending, however, is no mean feat, says OnBank's Sharp. "That part of the business has always been very competitive, but I have never seen it any more competitive than it is right now. We are all looking at the same thing -- that small business is the area where there is the most activity, and there is not much indication that that is going to change any time soon."

With the banks seeing pretty much the same vision through their crystal balls, it is obvious that they are going to keep dressing themselves up to dance at the small-business ball, coming out with revamped product lines and services and with staffs dedicated solely to businesses of $5 million or less in annual sales, or fewer than 200 employees, or whatever measure that the individual banks use.

They will keep coming out with streamlined loan applications, reduced needs for financial statements, and more personal attention from "relationship managers" and "small-business specialists."

At Key, James Murphy, senior vice president, reports that Key has dedicated a group of specialists to work with small-business owners only and has revamped its product lines to meet their needs.

"And we are putting together products and other things, such as software packages aimed at various business needs to make the business owners' job easier. We are giving away software for generating pro forma statements, for calculating staffing needs and scheduling, and more. We have put together a whole package of software to give to our small-business customers to help them manage their business," Murphy says.

And it is bearing results for Key, just as it is for other banks that have focused more attention and resources on small business. Murphy reports that small-business lending has increased significantly in the last year. "But I am not sure how much of it is due to our increased attention and how much is due to an increase in overall activity in that segment of the market," he adds.

Whatever the cause and whatever the climate, however, one thing is obvious -- it is going to remain a buyers' market for small-business loans and for banking services.

Copyright Central New York Business Journal Nov 25, 1996
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