The Power of a Great Banking Relationship

Taking the time to search for the right bank and banker can make the difference between success and failure of your business. A local commercial banker not only provides the financing your company needs but they’re also a valuable source for other products that will help your company succeed, and of information on networking opportunities, contacts, and professional advice.

Unlike investors or business partners, a bank is not an owner of your business and doesn’t act like one. The bank leaves the business of managing your company to you, because it doesn’t have an equity stake in the business. The bank’s role is to provide products and services to enable the business to thrive. Your bank and banker should be well-versed in loan structures to support the growth of your business, in cash management tools to improve the operating cycle of the business, and creative ideas to help you develop an exit strategy for when the time comes. They should also be attentive to your personal needs as an owner.

A local banker knows your community, industry, market, business, and the influential individuals who can help your business not only survive but thrive—even in difficult economic times. The banker knows the pros and cons of various sources of capital, which can help you manage your cost of capital. You should interview several banks, talk to different sources, and choose the right bank to fit your company's needs. Equally important is to choose a bank and banker with whom you feel you can develop a mutually beneficial relationship over time.
 

Start the Search for the Right Commercial Banker

When should you start looking for the right banker? Simply put, before you need one. The process should be incorporated into your regular planning cycle. It’s that important. When an opportunity arises, and you need cash immediately, there are fewer options. So, start your research before you need a loan. Today is a good day to begin.

Here's what to look for in a commercial banker:

• Experience in structuring commercial loans for businesses like yours
• Service and support during the development of the loan agreement
• Numerous lending options—one of which suits your business needs
• One whose bank has a full suite of cash management services
• One which has professional investment associates to help you manage business transitions or exits
• Referrals from business friends, employees, and colleagues
• Participation in Small Business Administration (SBA) or other government-backed loan programs designed to boost local economies

Look for a banker who you feel really wants to participate in your business's success. Working with a banker with a vested interest in the success of your company always delivers the best outcomes over the long term.
 

Choosing the Right Commercial Banker

In the interview process, ask the same questions and collect the same data so you accumulate comparable responses to the same questions.

Here are some good questions to ask:

• With whom specifically will my company work: one person, an associate, or a group of decision-makers? In short, who's the point of contact within the lending team?
• What skills and experience does the banker bring to the table?
• After the loan is complete, what is the nature of my future relationship with my banker? In other words, will this be a purely transactional relationship? Or will the banker be on your team going forward? HINT: you should look for a banker who will be available to provide additional advice, guidance, and support throughout the term of the relationship.
• What networking possibilities does the bank offer? Is the banker willing and able to introduce you to their contacts who might be beneficial to your company?
• Is the lending organization a member of a professional association like the local Chamber of Commerce, or important local philanthropic organizations? Affiliation with organizations like these indicate the bank is a good corporate citizen that is in touch with the needs and opportunities within your community.
• What is each banker’s approach to your company's needs? Do you feel comfortable talking with them? If times get tough, do you feel you'll be treated with courtesy, dignity, and respect?

The banker you select should have the right combination of skills, experience, flexibility, and creativity to craft a loan agreement and provide other services that suit your business needs and your personal business style.
 

Grow the Banker-Borrower Relationship

Help your banker provide better quality terms and services that benefit you and your company. Provide a copy of your business plan and then ask for input and guidance. Ask what steps you should take to improve the creditworthiness of your business and plan for the company’s future. Remember, the commercial banker at your bank likely will not have the final say on loan approvals. Ask how your proposal can be improved so a loan approval committee has the information it needs to ensure you receive the capital required under terms that are beneficial to your business. If you don't have a loan proposal drafted, ask for help getting started. Be prepared to show you're a good businessperson and an even better credit risk.

Ask for referrals to other businesses you might partner with or take on as new suppliers or buyers of your products or services. A commercial banker has local and regional contacts, so ask for help. It's in the banker’s best interest for you and others to succeed, so ask for introductions. A banker is more than a source of capital; they are an excellent networking source who can identify synergies between their clients that benefit all parties.

Ask about other products or services that can grow your business. The bank you choose might offer special financing options, business credit cards, credit lines, bundled financial services, and other tools to streamline routine business activity. In short, ask the banker to help you make your business succeed.

A good banking relationship is like any other relationship: it thrives on open, honest communication and is based on trust. Lose the trust of a banker, and the relationship will falter. Stay current on payments and build your credit by paying on time—ahead of time when your company is doing well.

Things don't always go as planned. You may lose your biggest client or a key member of your business team. When problems arise, be proactive and call your banker to discuss the implications of these business problems.

Finally build trust. Cultivate confidence. Do what you say you will do. Why? Because you are building a relationship that hopefully will last for years, maybe for the next generation of your business.