Any beneficial relationship involves a lot of give-and-take on both sides. If the scales tip too far one way, the relationship cools and important benefits get left on the table.
Unfortunately, when it comes to the business/banking relationship, the bottom line today too often comes down to the lowest bid and the lowest rate, making it difficult to drive the maximum value out of this crucial partnership.
“The key to a long-lasting and beneficial banking relationship is the free flow of information from both sides,” says Robert H. Friend, senior vice president at FirstMerit Bank, Columbus. “The biggest element is to limit surprises so when something unexpected happens, both the banker and the company can work through the problem together.”
Smart Business spoke with Friend about how companies and banks can work together to build stronger and more versatile long-term relationships that ultimately benefit both sides.
How would you describe a healthy banking relationship?
At the end of the day, we’re all selling money and we’re all collecting money. The key is how a bank services its customers, makes sure they are comfortable, and how the bank meets their needs when they have an issue or a concern. The key to a healthy two-way relationship is communication and give and take on both sides. It’s the banker’s responsibility to continually inform the company of any changes in the bank’s personnel or changes in attitude or corporate culture.
Conversely, a company should inform its banker of issues it might be encountering. The goal is to minimize surprises and maximize the relationship through collaboration.
How does a good banking relationship mitigate turnover and change?
Both sides should be willing to foster multiple touch points within their respective organizations. The banker should get to know the company’s owner, chief financial officer and chief operating officer. The company should aim for tight relationships with the bank’s lending officer, the officer’s manager or market president, the banking assistant and possibly one of its underwriters. In this case, if someone on either side leaves, there are still two or three solid touch points or ties available to the respective organization.
How does this free-flowing information create opportunities?
All too often, companies think of their banking institution simply as ‘the place I put my deposits or satisfy my lending needs.’ But most banks have numerous other products and services to assist a company, such as special benefits for employees with workplace banking, private banking and wealth-management services, or corporate needs like cash flow management and company-sponsored 401(k) plans. It’s the banker’s job to bring these valuable services to the table.
The most underappreciated and least-tapped service a banker can provide is expertise and advice. For instance, when a company is considering a new line of business or geographic expansion, the banker can be right alongside saying, ‘Hey, we’ve seen other people do it. Here are some of the issues they’ve had and here’s how they went about gaining success.’ In addition, the banker can make introductions to these other companies or other advisers.
Can a solid banking relationship actually supplement hard financial data?
Absolutely. It is easy to come to a conclusion on a course of action based strictly on the numbers, but that decision may not be in the best interest of the bank or the company. The reality is that numbers good or bad are only a part of the story. The developed relationship enables the bank to understand the reasons and actions that led to the numbers. The developed relationship enables the company to have a better feel for how the bank is likely to react. Most importantly, an established relationship fosters a positive environment that encourages the parties to work together to resolve a problem or issue in the best interest of both.
How can the bank/business relationship be maximized?
Companies are always going to shop and compare prices, but if they are often shopping numerous banks, it can take the relationship aspect completely off the table. Long term, that does not foster good feelings from the banker’s perspective.
In reality, both sides are often much better off maintaining what they have and building a mutually beneficial relationship that might not always provide the absolute lowest cost to the company or highest return to the bank. Considering the expenses, to set up new systems involved when a company changes banks and the costs that banks incur when bidding to gain new customers it would seem sensible, to find the right fit and work on maintaining a healthy and profitable relationship for both parties.
ROBERT H. FRIEND is senior vice president, FirstMerit Bank in Columbus. Reach him at email@example.com or (614) 545-2763.