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Buddy System

With innovative services, banks are creating new partnerships with small businesses.

When Roy Williams Sr. needed a loan to start New Orleans Depot Services in September 1996, he turned to New Orleans-based Whitney National Bank. After all, Whitney had served him well during the 20 years he'd banked there as owner of AAA Tire Finishing, a tire finishing equipment and supply company. When he decided to start a second business with his son Kirk, Williams knew his loan officer at Whitney would work with them to make it happen. And he was right. Just a few days after applying, the partners got an equipment loan and a line of credit for their shipping-container service and repair company.

Good relationships have always been important in banking, but these days, the relationship between banks and small business is rapidly expanding as more banks offer cash management programs, streamlined loans and convenience services to their small-business clientele. At Whitney National Bank, for example, Williams and other small-business customers can do more than obtain loans and lines of credit; they can also take advantage of a host of services under the bank's new Business Edge Banking program, which was launched in May 1996.

According to Whitney's vice president Rebecca Dey, Business Edge Banking was the direct result of input from small-business customers. Whitney defines a small business as one with fewer than 20 employees and no more than $5 million in annual sales, says Dey.

"We found there was a real need for a business checking account that is as easy [to use] as a personal checking account," Dey says. As part of Business Edge Banking, Whitney created a no-fee checking account for companies that write fewer than 150 checks a month and maintain either a $2,500 minimum balance or a $5,000 average collected balance each month. A consolidated monthly statement puts all account and loan activity in one report, simplifying cash management; customers can even receive a daily fax of the previous day's banking activity.

Whitney's Business Owner's ATM card provides 24-hour account access. "I know what small businesses' hours are," Dey says. "They're doing banking at 9 p.m. and on weekends."

Whitney National Bank is just one of a growing number of banks targeting small companies with tailored financial management programs. Although there aren't any statistics on exactly how many banks offer such programs, industry observers say the small-business market is garnering attention as other bank revenue streams subside.

Ann Grochala, director of bank operations at the Independent Bankers Association of America (IBAA), a trade group to which nearly 5,500 community banks belong, says that banks are seeing increased competition from nonbank financial institutions. Sources such as Merrill Lynch, American Express, Money Store and even insurance companies are helping small businesses finance equipment and inventory. She adds that one way for banks to compete is to offer other products, such as cash management and electronic banking.

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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: Buddy System.

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