This paper explores one possible channel that could explain part of the large IPO underpricing of firms listed in the Small and Medium Enterprise Board of Shenzhen Stock Exchange in China. Firms use underpricing to signal their growth potential and attract bank-related investors to establish banking relationship via them. The underpricing cost may be recovered from financing future projects with cheap bank loans brought by the banking relationship. We find the IPO underpricing level is significantly and positively related to the number of firms’ bank-related investors and the offline allocation of new shares to these investors for the private firms only. And this relationship is dramatically weakened by policy changes aiming to address financing problems for the small- and medium-size firms. We also find firms with high level of underpricing and more bank-related investors will experience better financial conditions after IPO, including having higher chance of conducting SEOs, higher cumulative loan growth, and less investment-cash flow sensitivity.