This research investigates how SME performance, the typology of loans and the length and scope of rela- tionships between small banks and SMEs affect the margin adjusted for the risk that each customer gen- erates. After analysing 4285 firm-year observations from Finnish banks, the quality of a SME’s performance is found to be the major factor in explaining the risk-adjusted profitability of banks. How- ever, the length and scope of a relationship and the loan dimensions also play an important role.