How to create a mutually beneficial partnership with your bank Featured

8:00pm EDT April 25, 2010

Many businesses think of their bank as a place to cash checks and keep their money, but if they take the time to build a relationship, that bank can offer so much more.

By creating a relationship, a business will find that its bank can do so much more than offer products that are generally similar across all financial institutions.

“There is an ongoing dialogue that is fully appreciated within a financial institution concerning what clients mean to the bank,” says June Courtney, executive vice president of commercial banking, Old Second National Bank. “A bank should do so much more than provide credit products. Banks that are re-engineering their cultures are talking to business owners about what the bank can do for them.”

Rather than answering a business owner’s questions with product solutions, bankers who are interested in building lasting relationships with clients are listening, asking questions and offering ideas. Instead of just pushing products, they are learning about clients’ industries and speaking with them on a business-owner level rather than from a banker/decision-maker pedestal.

“When bankers approach a relationship by talking about the challenges that face their clients’ industry, when they open up that way, clients recognize that bankers are interested in learning what difficulties they face and finding solutions so the bank can be a help,” Courtney says.

Smart Business spoke with Courtney about how a business owner can work strategically with a banker to the benefit of both sides of the relationship.

What is relationship banking?

Focusing on relationships can be misconstrued as wining and dining, golf dates and lunches out. But that’s not what relationship banking truly means. Instead, it involves understanding clients’ needs, listening to them and delivering products that execute on those needs. It means being there when clients really need help — and that’s the case with many businesses in this economic climate. A banker can and should serve as a sounding board and trusted adviser to the business. With a focus on the long term instead of just filling need-it-now orders, banks centered on relationship-building rather than simply selling will stand by their clients in good and bad times and help them execute plans for growth, succession or whatever the future holds. That relationship goes beyond networking — it’s truly making sure that each party leverages the relationship.

For instance, a bank can look at its own vendor opportunities and open the door to local businesses that are clients to also do business with those vendors. Then, every time employees of that bank go out into the market and talk about companies that it does business with, those companies also benefit. A relationship-focused bank will think of clients as strategic partners in every sense.

What is a business owner’s responsibility in building a mutually beneficial relationship with its bank?

All banks are not alike, and as soon as a business owner asks, ‘What’s the best price you can offer?’ the client is commoditizing the bank. It’s a silly question to ask if you consider the way businesses feel when a supplier, vendor or customer turns that question on them.

At the end of the day, businesses should carry those values over to their banking relationship, understanding that the cheapest price might not buy the services and strategic partnership they are looking for in a banker. So No. 1, look beyond price and focus on your needs and discussing those openly with a banker.

That brings up an important second point: transparency. A bank wants to understand what challenges a business faces, where it has been and where it wants to go. Clients should be open and willing to have a well-informed dialogue around their objectives. A business must tell the whole story, good and bad, to help the bank understand what role it can play in guiding the company forward.

What is an example of how this interplay between banker and business can play out?

Here’s a scenario that describes how a banker can bring ideas to the table that can change a business’s destiny. We had a customer who was a pure distributor in his industry 10 years ago. While talking about the business, the banker asked, ‘Is this all there is for you? Because I think the real value we can create for you is if you were no longer just a distributor, but, in fact, we vertically integrated you and turned you into a manufacturer where you could control more of your own destiny.’

Four hours later, that’s exactly what the business decided to do. This company is hugely successful today, evolving from a sleepy little distributor into an earnings engine and creating significant wealth for the owner and his family. It was all about idea generation between the bank and his business, and executing on those ideas.

How can a business find a banker who will work as an adviser and strategic partner?

Business owners should ask for a resume when they talk to bankers. Find out about their background and ask questions about how they have helped others.

If you really want someone who will serve as a strategic adviser or counsel, select a banker just as you would an attorney or accountant.

June Courtney is executive vice president of commercial banking for Old Second National Bank, Aurora, Ill. Reach her at (630) 801-2219 or jcourtney@oldsecond.com.