The right stuff Featured

7:00pm EDT January 26, 2009

Choosing the right bank is critical in today’s gloomy economic climate. As credit markets tighten, it is more important than ever to have a banking partner who can provide the financial resources necessary to help you grow your business.

This decision should not be made in haste, however. Switching financial institutions is one of the most important decisions that any company will make.

“Prior to making a banking change, a company should be absolutely certain that the relationship is over and that options are better elsewhere,” says William Phillips, senior vice president and group manager at Comerica Bank. “Careful consideration should be paid to a business’s current circumstances given the financial markets today and what the upside to making a change would be.”

Smart Business spoke with Phillips about selecting a bank in uncertain times, how to most effectively make a transition and the importance of communication.

What type of service and performance standards should businesses expect from banks?

Much has changed over the past three months. For banks today, there is a premium on liquidity, capitalization and balance sheet strength. Savvy business owners should know the financial health of their banking partners. Beyond that, businesses should expect their bank to offer comprehensive financial services, including cash management services, treasury management products and a wide array of lending products. Lending products can range from loans to finance a business and loans to finance asset purchases to loans to finance property purchases. You need to look further than whether the bank has basic lending capabilities; it should have all the products and services necessary to develop your business.

How can a company benefit from teaming up with a bank that offers a multitude of financial services under one roof?

Working with a bank that can meet all of your needs allows you to improve internal efficiencies. By leveraging one organization’s talent pool and the products and services it offers, you don’t need to seek out additional financial institutions. Having one bank and point person negates the need to retain additional staff to juggle multiple relationships, procedures and policies that can vary from one financial institution to another.

Why is it so important to look for a bank that has a history of supporting its customers through various business cycles?

It is essential to partner with a bank that is going to support its customers in both good times and bad. You want to find a bank that is consistent and reliable in all different business cycles. Avoid financial institutions that aggressively seek to build customer relationships with below market pricing and fees when times are good as they tend to indiscriminately dump customers when portfolios become risky and markets turn. The key is to find a stable institution that has proven itself through both prosperous and lean times.

How can a company most effectively transition from one financial institution to another?

First, companies need to seek out the advice of their financial advisers, whether they are attorneys, CPAs, neighbors, colleagues or friends, and familiarize themselves with the different financial institutions in their geographic area. Lending institutions have different tolerances for risk and size and have specialties and expertise that may be unique to a certain industry. Company leaders should find the time to meet with banking professionals that they know on a personal level or who have made inquiries about servicing their business. It is important to develop relationships and have a backup plan to avoid a costly and disruptive transition. Without a plan, financing options become very limited and expensive. In some cases, when businesses depend on outside financing for day-to-day cash flow, the result can be disastrous.

How important of a role does communication play in sustaining a positive working relationship?

Communication is everything. If you don’t have communication in the relationship, then it is more of a transaction than a partnership. Should a problem arise, you want to be sure that the people you count on to support the business are part of the team and are in the loop as far as key developments, changes and strategies go. Open, candid communication helps grow and foster relationships, which is extremely useful when issues arise, particularly during troubled times. Banks like Comerica that provide financing and cash management services play a critical role in the success of a business. There has to be trust, respect and honesty.

WILLIAM C. PHILLIPS is senior vice president, group manager at Comerica Bank. Reach him at or (562) 590-2512.