While Morgan Stanley is a relative newcomer to the small-business financial services industry, its commercial lending practice is hardly unique. Merrill Lynch & Co. Inc. introduced the first central asset account to consolidate checking, investing and borrowing for small businesses in 1986. Morgan Stanley and Salomon Smith Barney Inc. are now mining their own customer bases for potential small-business clients. Their often friendlier lending procedures, account consolidation and other services intended to cut the clutter of running a business are effective marketing pitches small businesses are embracing. At the same time, bank consolidation has left some disgruntled entrepreneurs seeking a personal relationship with a financial advisor, which has also fueled the financing trend.
This credit option isn't for the fledgling business, though. Minimum deposit requirements, typically $20,000, as well as lending restrictions on some industries-Morgan Stanley, for example, won't lend to restaurants, gas stations, hotels and construction firms unless they pledge securities as collateral-favor a more select group of high-end small businesses than typically found on a bank's loan roster. Morgan Stanley's standard client has been in business for five years and has sales of more than $10 million. As a minimum, businesses must be at least two years old and have sales greater than $1 million. Merrill Lynch, meanwhile, generally focuses on companies at least three to five years old with revenues of at least $5 million.
Merrill Lynch, which has tripled financing commitments to small and midsized businesses to more than $6 billion over the past five years, now ranks among the top 10 small-business financial services providers, according to market research firm NFO Financial Services.