While some banks have stopped commercial lending or curtailed it in the face of economic uncertainty, many are still lending money — you just need to know where to look.
But in addition to finding a bank with available funds and a great interest rate, you need to find one that can service your organization’s needs and with which you can build a solid business relationship.
“The old adage of ‘You get what you pay for’ is very true right now in the banking world,” says Darlene Nowak-Baker, an executive vice president and lending manager with First Place Bank. “People often look at a bank as a commodity, but it’s not. Sure, money is money, but when it comes down to it, you need to partner with a bank that takes time to understand you and your business and will be with you in good times and bad times.”
One of the best ways to ensure that your banking relationships are as strong as they should be is to look at how the bank handles loan servicing, which includes everything that’s involved with your loan after the deal is closed, such as billing, payments of principal, and interest and escrow.
Smart Business spoke with Nowak-Baker about loan servicing, and why a good relationship with your bank is more important than any interest rate.
What should business owners know about the treatment of their loans?
After the loan is closed, the servicing starts. You want to find a banking relationship that is customer focused, and this will be evident throughout the process, which starts with your loan officer.
After the loan is approved, it gets handed off to a portfolio manager, who will have continued contact with you for the term of the loan, ensuring that the bank is doing everything it can and should be doing.
Your loan officer will stay involved, as well, particularly if you have a new or additional loan request.
With a two-tiered point of contact, you’ll know that you have two people at the bank who always have your best interests at heart.
How does the relationship between a business and its bankers work?
On the front end, the loan officer gets to know you and your business. He or she will find out about your business and its nuances, collect financial data and acclimate to you in order to assess exactly what you need, both now and down the road.
Once the loan passes through the credit department, the loan officer works to obtain the necessary approvals and then initiates the closing process, where the loan transitions to the portfolio manager.
This is where you determine that your bank is working for you. A good portfolio manager will maintain an ongoing relationship with you, offering an open line of communication. Your portfolio manager will be there if you have any problems or additional borrowing needs, which is vital, especially in an uncertain economy.
A good, relationship-driven bank wants to be there for you in your time of need. Whether you need cash flow relief, restructured debt, a longer amortization or an interest-only plan, you want a bank that’s willing to do whatever you need to help you weather the storm.
And internally, portfolio managers and loan officers have tight relationships. They’re your teammates, so to speak. So if something does go wrong, they will be there to help you through it.
What does a business owner need to know when meeting with banking partners?
The main thing is to be open and honest. Many borrowers think that if they tell the bank they’re having problems, the bank will pull the plug and their business will go under.
The bank wants to be a partner and help its borrowers through the rough patches. Also, consider the end game: The bank wants to get repaid. It doesn’t want to take a loss.
A business owner needs to be prepared when meeting with a banker, especially in light of this economy. Make sure you have all of your updated financials, interims, accounts receivable and payable, as well as what obstacles lie ahead for you and your business. The more open you are, the better your banking relationships will be.
What problems can arise during the loan process?
The biggest issue is being forthright and honest. Many times, something won’t be communicated in the early stages because business owners are afraid to tell the bank. Then, you get so far down the road, and all of a sudden, a problem comes up.
Most times, if the bank would have known about that issue beforehand, it would have made sure that you never even got into that situation in the first place. It’s easier to handle an issue before it happens, not right in the middle of it.
No matter what problems you may be having — back taxes, property liens, lawsuits, grievances, etc. — tell your banker. More often than not, there is a solution.
Bankers don’t want to play hide-and-seek; they want to help you get the loan you need to grow your business.