In order to prosper in an increasingly competitive marketplace, it is essential to have a dedicated banking partner who is intimately familiar with your business needs and who can provide customized financial resources to grow your company.
A bank that doesn’t pay attention to your company’s needs and instead takes a one-size-fits-all approach may not be a bank that you want to build a relationship with.
“If clients have concerns about their banking relationship, that may be a good indication that they should look for a new banking partner,” says Alfred DeFlaviis, chief lending officer and senior vice president of First State Bank.
Smart Business spoke with DeFlaviis about how to identify a suitable bank and the importance of being prepared when seeking a loan.
What should a business look for in a bank when it is seeking a loan?
A business should look for a bank that takes the time to work with it and is interested in creating a partnership to help move the company forward toward achieving its financial goals. Find a bank that is familiar with the industry and geographic area in which the company operates and has other clients in similar industries. This allows it not only to tailor a package of financial products and services to the business but to share trends it has seen in similar companies.
How does the size of a bank influence how it does business?
National banks usually have a broad range of products and services and try to fit customers into their existing offerings rather than tailor products and services to fit the customer’s individual needs. Community banks have a lot more flexibility to offer customized solutions.
Take, for example, a company in need of many products and services that was doing business with a larger regional bank. The company was working with four individuals within the bank because regional banks tend to pigeonhole bankers into specialized categories, such as C&I loans, commercial real estate, small business loans, etc. The company’s leaders became confused as to whom they needed to deal with. Consequently, the package of financial products and services that was given to the customer by four internal bankers didn’t work. Individuals were selling their particular products and didn’t understand how all of them would work together to help the company achieve its goals.
Community banks, on the other hand, usually have one person, a commercial relationship manager, who coordinates products and services. That person will understand what a customer needs and create a package of products and services that meets the customer’s needs.
Because these institutions are smaller, the business owner may be able to talk directly with higher-level decision-makers to present his or her case. Larger banks have more rigid rules and processes associated with small business loans, and even if the person you’re talking to believes in you, he or she may not be able to help.
How can a business identify a suitable bank to partner with?
First, evaluate your existing relationship. Has your bank been responsive, acting not just as a lender but as a partner? If not, it may be time to find a bank that can work with you to grow your business. When making this decision, remember a community bank is knowledgeable about the community in which you operate and can make decisions based on that information at the local level instead of relying on decision-makers in another city.
After identifying a bank, how can you improve your chances of obtaining a loan?
Be prepared. Have a very clear goal of what you are trying to achieve. Existing companies should provide two to three years of historical financial statements/tax returns, for the business, related entities and owners. And all businesses should have a two-year business plan with a sales goal, profit goal and summary of business activities. Also have the assumptions used to derive those goals; if you are going to increase sales by 20 percent, specify how you are going to do that. If you don’t have a business plan, your banker should be able to help you develop one.
When obtaining a loan, what should a business expect from its banking partner?
Businesses should expect a high level of attention, both pre- and post-closing. Oftentimes, once the loan is closed, a bank and its client won’t communicate again until a problem arises on either side. Bankers and their clients should keep the lines of communication open, conveying information and building a partnership. A good lender sees customers regularly to make sure everything is progressing as planned based on discussions they had prior to the loan closing. In addition, the lender should be a consultant, helping the business expand and providing guidance.
A bank with good customer service should communicate with the borrower, at a minimum, on a quarterly basis. During these conversations, the business owner should convey to the bank how the company performed during that time period, whether it is on track with its business plan, how the bank’s products and services are working and whether there is anything the bank can provide to keep the company on track.
How has the downturn in the economy affected bank loans?
When the economy takes a turn for the worse, you must have confidence that you can get through the rough patch with the aid of your bank. Too many times, customers wait until there is a problem before they go to their bank for assistance, making it difficult for the bank to help. However, if the banker and the business owner have maintained a good relationship with open communication, the there will be no surprises on either side.
Alfred DeFlaviis is chief lending officer and senior vice president of First State Bank. Reach him at (586) 775-5000 or [email protected]