How to get the most out of your local banking relationship

Misconceptions about banks still linger for businesses, even though it’s been easier to obtain financing in recent years. Some incorrectly assume that banks only lend money during good times when companies least likely need it, or that during the economic downturn regulators prohibited banks from lending money. Still others erroneously believe that their business is too small for conventional bank financing.
“But we think there are easy ways around these views if you’re working with banks — and there are lots of good community banks in Cleveland — that take the long view with customers, and help companies through both ups and downs in the economy,” says Tom Fraser, president and CEO of First Federal Lakewood.
Smart Business spoke with Fraser about how to get the most from your bank with a consistent, predictable relationship for both good and bad times.
What should a business owner look for when choosing a bank?
When selecting a banking partner for your business, first investigate the institution’s history of financial performance and stability. If that is strong, it indicates that its risk appetite will remain steady and it has the potential to be a consistent partner.
Additional criteria to examine are the bank’s suite of services, the depth of its expertise and the markets that it serves. It’s important to know if a bank has a track record of interacting with businesses in your market segment, and if the banker and team who will own your account have experience applicable to your business requirements. More specifically, delve into whether or not they have an aptitude to understand your business and to anticipate your needs as they evolve over time.
Should a business interview their banker?
It’s fair to ask your banker some questions. For instance, find out what other small and middle market companies the bank has dealt with and what solutions those have brought to bear on the market. You might also consider asking how the bank’s risk appetite has changed since the economic downturn. Think of your bank as your company’s largest vendor. You want to know your critical suppliers are reliable and available.
Also, as a CEO or CFO, you should know the bank’s president and chief lender. Your financial future should be entrusted to someone you know and trust, rather than an anonymous committee or policy.
What’s the biggest benefit to banking locally?
Beyond quick access to decision-makers, there are several reasons to bank locally. First and foremost, when business owners and consumers make deposits with a locally owned or headquartered bank, those funds are reinvested locally. This concept of mutuality creates a healthy business climate and contributes to a vibrant community. Teaming with a community bank is also beneficial because of its depth of relationships with other area professionals.
How else can business owners get more out of a banking relationship?
Like any successful relationship, the key is to invest time getting to know each other. A financial partner is a critical player in a company’s success, so it is vital that the bank and business know what each other’s priorities are as well as how each party operates internally and goes to market. In order to achieve that, open communication at every level is critical, including branch staff, members of the bank’s treasury team, and operations and support personnel.
Your banker should act as a trusted adviser. For example, bankers have experience with cash flow cycles and expansion opportunities, so they can readily help with early advisory initiatives for financing — and they don’t charge hourly like CPAs and attorneys. It’s also often more economical to work consistently with your primary bank because you’re already sharing information.
How often should you look around at the offerings and benefits of other banks?

It goes without saying if there’s a problem you need to explore new options. More proactively, if there’s a major intersection in your company’s trajectory on the horizon, such as a new building purchase, an acquisition of new equipment, an acquisition of another company, etc., that might be a great time to make certain that you are in the best possible relationship to meet your upcoming needs. A good banker will never mind being put to the test.

Insights Banking & Finance is brought to you by First Federal Lakewood