“If you’re not satisfied with the bank you’re with or if you have some questions or concerns about it or you just want to get a second opinion to ensure you’re getting the value that you should be from your relationship with it, then that’s the right time to interview other banks,” says David Janus, president and CEO of FirstMerit Bank.
Interviewing a prospective bank can be a stressful process if you aren’t properly prepared, but the reward is a relationship with a company that completely understands your business’s needs.
“That process is going to depend on how formal or informal you want to be,” says Janus. “If I am a business owner, the first step is deciding whom I want to interview. I recommend you get referrals from your accountant, your attorney or other trusted advisers. Certainly one of those folks would have a recommendation for a banker or bank you’d want to visit with.”
Smart Business spoke to Janus about what business owners need to know about interviewing a bank.
What should business owners do before meeting with a bank?
Prepare an agenda in advance of the meeting and share it with the bank. Then, ask if there are things in addition to what is on the agenda that they would like to cover. You need to begin with the end in mind. Decide what you want to hear from the bank and what you want to share with the bank.
That interview meeting will be a two-way, thoughtful business discussion. You are sharing relevant information about your company and the bank is sharing relevant information about the bank, so you can both come to a decision on whether there is a good fit.
Have the agenda distributed prior to the meeting. That way, you’re making the most of your time and you ensuring that you’re addressing any questions that the bank is going to have and that it is addressing any questions you may have.
What information should you be prepared to share?
Touring your facility is always a great way to help the bank understand your business. That way it’s not just about looking at numbers on a page; the bank gets to see the operation. Also, be prepared to share information from your business plan. You really want to help the bank understand your business, so be prepared to tell it what you do. Help it understand how you make money.
Do you make things? Are you a service company? Who do you sell to? How do you set up supplier relationships? What is your geographic market? What are your competitive advantages? You need to help the bank understand what you do, how you do it and what makes you so good at it.
Share background information on the management team so the bank knows who’s running your business and their capabilities. At the end of the day, it’s a relationship business. Banks want to have confidence in the management and ownership of that company.
From a financial standpoint, be prepared to provide at least three fiscal year-end financial statements and tax returns and any interim financial statements on the company with prior-year, same-period comparisons.
I would share with the bank the services you currently have with your current financial institution and why you have those services. If the bank knows what you value about those services, it will know what the current banking relationship looks like. You should also be prepared to describe the loans you use and your plans for the coming years so it understands how they can best help you.
What should businesses look for in a banking relationship?
A bank shouldn’t be an order taker. It’s not like going to the restaurant where you say, ‘I want a hamburger, fries and a milkshake.’ You’re going in and saying, ‘My plan is to grow my company 10 percent and, to do that, I know I’ll need an increase in my working capital line. And my building is starting to feel pretty tight. What do you think about helping me finance a plan expansion?’
I would encourage the banks to think creatively and bring new ideas to you. Let them know that you really want to hear their recommendations; you want their advice. Bankers are experts at getting to know a business, its cash flow and cycles, and then coming back with recommendations.
Bankers can advise you on ways to save you time, save you money and make you money. If you encourage them to be creative and bring new ideas, they will.
What questions should business owners ask the bank during the interview?
Ask the bank to describe its company, organizational structure and culture. That way, you have a sense of who the bank is. It is important to find out how decisions are made with respect to loans. This takes the mystery out of the decision-making process.
Find out if a loan committee or just a few people make the loan and, most importantly, are any of those decision makers in your local market. If so, find the key decision makers and find out how they make the decisions. And make sure the follow-up timeline is clear in terms of when you’d like to have a decision made.
Also, ask about the bank’s team and how experienced it is with your type of business. For instance, if I were a manufacturer, does the bank work with other manufacturers? Try to understand their experience level, as it is an important factor in the bank becoming one of your trusted adviser team members.
DAVID JANUS is president and CEO with FirstMerit Bank. Reach him at (216) 694-5658 or email@example.com.