Maximum banking relationships Featured

7:00pm EDT December 31, 2006

Every new business chooses a bank to serve its financial needs. In years past, selection criteria probably included physical proximity to the institution, the interest rates and fee structures, or perhaps a solid relationship with the branch manager. Today, most banks offer nearly identical services — but not identical service.

Like a marriage, banking relationships need to survive both good times and bad times to flourish. When a company is doing well, it’s very easy to have a good banking relationship. “At the end of the day, when a business is choosing a commercial bank, it must focus on the relationship aspect of the selection,” says Terri L. Cable, executive vice president of FirstMerit Bank’s Southern Ohio Region, which includes Columbus. “A positive relationship creates the flexibility required to meet the challenges faced by small, middle-market and privately-held companies.”

Smart Business spoke with Cable about banker/client relationships and the importance of selecting a bank that understands your business.

Should a growing company consider changing banks?

When a company is healthy and growing, it is clearly not the time to change banks, unless there is some irresolvable issue in the current relationship or a need that your bank cannot accommodate. Just because you’re growing doesn’t mean you need a new bank. You want to work with the bank that best knows your business and can relate to you as a partner while your operation grows. And it’s a two-way street — the client should also understand how the bank is positioned and be educated about what it offers.

In a difficult banking relationship, it usually gets back to one thing — communication. The bank needs to research the industry and understand the complexities and challenges of the business. The client also needs to understand the bank’s expertise and its limitations. Communication as a process needs to occur continuously. Otherwise, a disconnect will surely occur at some point in the relationship.

Are there benefits to using multiple banks?

Yes. When a company is experiencing rapid growth, it may be beneficial to add banks to increase credit capacities. Additionally, when a growth company has acquired a diverse set of challenges, both domestically and internationally, it may be beneficial to investigate a multi-bank strategy. However, if the company is a growing, small or middle-market business and owner-managed, a single relationship typically can meet your needs.

How can a positive banking relationship help a company grow?

The key word here is relationship. A strong banking relationship exists because your local banker — and the senior management of the bank — has ‘institutionalized’ you as a customer. They understand your business, your goals and the opportunities your business is presented with. I like to say this scenario is priceless. They will be with you during the good times and the bad times. They’ll be responsive, consultative and solutions-driven. That’s how they can help you grow.

What are the first steps to selecting a banking institution?

The very first step is to understand the value proposition of the prospective bank. What is its area of expertise? How effective are its relationship managers? What is the background of senior management?

Second is how it is positioned for responsiveness. Where is the decision-making authority — local or centralized? Do customers have access to senior management? Can you get to know multiple layers of management within the bank? There are situations where you’ll have turnover at your bank. If your primary contact departs, it’s very important that you know the layers above this person, people who also know you and your business, so there is no disruption.

A prospective bank should ask the tough questions. Does it understand the cyclicality you face and the unique challenges in your industry? It should also define how you are going to communicate.

Can banks bring new business to their clients?

Absolutely. There are many situations and multiple ways that can occur. Banks often hold business development functions, inviting prospects and customers to network so they can get to know one another, talk about their businesses and learn more about the institution’s services. A strong banker/client relationship promotes opinion sharing and referrals as opportunities arise.

TERRI L. CABLE is executive vice president of FirstMerit Bank’s Southern Ohio Region, which includes Columbus. Reach her at (614) 545-27997 or Terri.Cable@firstmerit.com