There are a number of benefits to be gained from having a strong relationship with your bank, but it takes an investment of time and effort to make it happen, says Justin Vogel, vice president and relationship manager for Corporate Banking at Bridge Bank.
“Many business owners are going through their day and not even thinking about banking,” Vogel says. “That’s an imperative part of their business and its ability to continue moving forward. Having a banker that is going to worry about that end of your business is very important.”
One way to gauge the strength of your relationship with your bank is to answer the following question: Who is your banker?
“If you tell me the name of your bank and not an individual person’s name, that’s a sign that the relationship could be better,” Vogel says.
Smart Business spoke with Vogel about building a better relationship with your bank to boost your company’s financial performance.
What are some banking products and services that can make a business stronger?
A line of credit can be a huge advantage to companies that might have strong cash flow but don’t think they need a line of credit. These companies often don’t recognize the advantage of using a line of credit to pay their payables early and take advantage of the discounts. They say they don’t want to pay interest to the bank.
Let’s say you have a supplier that gives you a 2 percent discount if you pay within 10 days. The bank is going to charge you 4 or 5 percent annually and if you are paying that supplier six times a year at a 2 percent discount, that’s 12 percent.
Paying interest to the bank is a lot cheaper than the discount you will realize by using a line of credit. That’s one area where a company doing well isn’t taking advantage of very inexpensive financing in today’s market that could help it perform even better.
Businesses are getting a lot savvier as far as treasury management and international banking products and services are concerned. It’s become a big cost-savings mechanism. If you do a lot of wire volume, switching that over to Automated Clearing House (ACH) transactions is a big fee saver.
Issuing ACH payments is also more secure than issuing checks just from a security and fraud prevention standpoint. Fraud prevention, convenience, technology, those are all areas where we’re seeing a big uptick. A lot of that has to do with the fact that you have a lot of the older generation of business owners, the baby boomers, who are starting to retire.
So you have a younger business community coming in that is used to doing personal banking on their smartphone. They want that ease of use with their business banking as well.
How can a company enable a bank to provide even greater support?
In an effort to save some precious time, businesses will often provide the minimum amount of information to their bank or potential lender to try to get a term sheet before they go through the hassle of providing all the detailed information that would normally be required for complete underwriting.
When you do that, you’re often getting a worse deal in the process. Once that proposal is accepted, the pricing and structure that is in there is usually going to stay, even if beneficial information is uncovered through the due diligence process.
Provide as much information as possible upfront to get the best structure, pricing and deal possible. Be organized before you go to your banker and have projections at least for the current year. That provides your bank with a better idea on how to structure the plan and anticipate your future needs.
How can the relationship with your bank be strengthened?
The squeaky wheel gets the grease. Your banker might just assume that you’re happy and not be proactively thinking of ways to improve your customer experience. Tell your banker you’re curious about what new products and services they have coming out that could help your business, and let them tailor solutions to meet your needs. ●
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