03/02/12: Easy steps every banker wants you to take:
As a former commercial lender in all sizes of banks for many years, I often have the privilege of working with our clients here at fi-Plan Partners to either establish, or enhance, their lending relationships. It’s always helpful to me in assisting their preparations to “place myself mentally” back into my former career and evaluate the relationship as if I were going to have day-to-day responsibility for their account.
It occurred to me recently that whether our clients had private banking or owner-managed business needs, there were certain things that, as a banker, just made the relationship go much better regardless of the type of account that it was. Based on that experience, we hope that the following points benefit and improve your lender relationships!
1. Communicate “early and often” in helping your banker understand your “on-going” risk profile and make sure that he/she is a key component of your advisory team.
When I was a banker, whether the news was good or bad with a client, my best customers were always providing me relevant information before I asked for it. The mistake that most bank customers make is that they will share such detailed information with a CPA or attorney regularly, but not with their banker. Contrary to popular belief, good bankers really want to “partner” with you to improve your situation and are not as judgmental as you may think.
2. Do your homework on a bank’s financials, what is important to them, and how your relationship “fits” with what they are trying to accomplish. “Climate changes” with banks do matter!
Like any business, banks need to be profitable and satisfy shareholders. And, like other businesses, banks have certain relationships that are more “desired” from time to time in meeting their goals.
For example, if a bank has had considerable negative experience recently with commercial real estate loans, their “climate” for such loans is tougher, despite the fact that your credit is “sterling”. I always tell our clients to first get a good “roadmap” of where a bank is financially and what they are emphasizing.
For both publicly and privately traded banks, a great tool is the FDIC.gov website. Under the “Analyst” tab on the site, there is a “bank find” function that allows you to review, in detail, how banks are performing and what types of loan and deposit categories appear “high growth”. It compares these to those that do not appear to get much attention, or have been performing poorly. Simply put, choose a bank that is after your type of business. There are differences among them.
3. Banks look at the total yield produced by your entire banking relationship with them, not what they are making on a singular transaction. Having multiple relationships with one bank does help!
Understand that when a bank evaluates their relationship with you, it is done on a total “yield” basis. In general, customers with multiple relationships are more highly valued. Even if you do not have a significant loan need, offering a bank operating checking account balances helps their returns by lowering costs.
4. Don’t expect a bank to be very receptive to helping with problems that you should really fix on your own.
Banks will rarely lend “into a problem” that does not allow them to create a stronger relationship on the other side. During my banking career, two good examples of loans that I always avoided were: (1) lending to an individual to clear a tax lien, and (2) for companies, lending money to make payroll. Both were signs of deeper problems that “throwing in additional debt” would simply not fix. My best customers were those that used bank debt to get “farther, faster” with a positive, cash flow enhancing, goal. Examples were: (1) financing equipment that would add a product line, (2) loaning money for a new facility that actually lowered the rent payment that the business was formerly paying, or (3) financing the acquisition of a former competitor. In each case, the cash flow production improved.
With individuals, similar cash flow improvements can be made by helping restructure current debt. Frame your request in “cash flow enhancing” terms, which is a language that bankers like and understand!
5. Be a referral source for your banker on quality business like yours.
This is generally overlooked by the borrowing public, but really goes a long way with a banker. Because banking is a very competitive business these days, “raiding” good relationships from competitors is necessary to grow market share. Because of these competitive pressures, sending referral business to your banker on a regular basis is really noticed and appreciated.
6. “Allow” the bank to make good money on the risk that they are taking (particularly early on) as a way to build your relationship with them.
Just like anyone else, bankers don’t like to constantly be “beaten to death” by a customer who wants the bank to take significant risks and then “shops the rate” before the transaction is closed. As a banker, these customers might get a “deal” on the first transaction that they did with me, but I would not go “out of my way” for them on the next, and more significant, transaction. A banker friend of my used to colloquially refer to this as “leaving a little seed corn in the field” for the growth of the relationship. Everyone wants to do banking as cost effectively as they can, but make sure that you are also thinking “big picture” in forging a long-term relationship.
7. Make an effort to meet everyone at the bank that is in the “reporting chain” where your business is impacted.
This has great value, both in the “day to day,” and the long term. My personal private banking relationship is currently with a mid-sized bank in the city where I live. Not only do I have a close relationship with my immediate officer, I have also met her “substitute” on days when she is out, the credit officer assigned to me and the city president with ultimate responsibility.
I have made it a point to implement all of the factors listed above with each, and I can say without question, it is the best banking relationship that I have ever enjoyed! Hopefully, yours can become the same by using these easy steps that bankers really “wish you would know”.
Please email me here or call me at (205) 989-3498 if you have any questions or concerns about your banking relationship.
Ashley Page, JD, MBA
Senior Vice President