Business-banking relationships under stress.

• Author: Berg, Joel
• Position: BANKING TRENDS

Erik Wukitsch found little wiggle room last fall when his bank cut his company's credit line to $12.5 million, from $15 million. But by midwinter, after the first shocks of the financial crisis had passed, Wukitsch started to notice a shift.

Managers at his bank--JPMorgan Chase & Co.--appeared more sensitive to customers' economic pain and more willing to work with them, says Wukitsch, chief financial officer of Vantage Apparel Co., a $50 million company in Avenel, N.J.

"This is the first I heard of a bank realizing that a relationship is not a one-night stand," Wukitsch says.

Wukitsch says he is "very happy" with JPMorgan. Still, he's keeping his options open. He uses TD Bank for payroll and has eyed services from HSBC Bank USA, the U.S. division of London's HSBC Holdings plc.

"There are opportunities out there to change banks," Wukitsch says. "But it's better to sleep with the devil you know than the one that you're not sure of."

A JPMorgan spokesman says the bank hasn't altered its approach to middle-market customers, many of which have decades-long relationships with the New York company.

No matter how old they may be, however, the bonds between banks and their business customers have been fraying over the last six months. To shore up their balance sheets, banks have been raising interest rates, cutting credit lines and imposing stricter requirements on borrowers. They also have become more aggressive about asking clients to deepen their relationships before extending credit.

"If they're going to lend money, they want to know that they're the main bank," says Ginger Siegel, former head of small-business sales at Seattle-based Washington Mutual Inc. and former head of small business at New York's Citigroup Inc.

"The reason, quite frankly, is that if you're my customer and you have all your deposits with me and you do all your lending with me, then I can keep a better eye on you and your business," says Siegel.

Good banks typically insist on a full relationship no matter the economy, she says. But when competition was fierce and banks had plenty of capital, they were more open to making only a loan.

Though most banks now are currently in the driver's seat when it comes to commercial relationships, Siegel notes they still need new customers to grow. As such, financial executives shouldn't underestimate their power to push back, even in today's rough economic marketplace.

"Banks are going to ask tough questions and banks are going to be much, much more careful about lending money," she says. "But at the end of the day, banks are still in this to develop relationships with customers."

Corporate executives understand the pressures squeezing their banks. Nonetheless, they are rattled by the effects.

According to a January survey by Greenwich Associates, a Stamford, Conn.-based research firm, 44 percent of mid-sized companies feel they are being taken advantage of by their banks...