Making a difference Featured

7:00pm EDT January 31, 2007
In the world of commercial banking, personal relationships truly make a difference.

“Get to know several people at the bank, not just one person,” says Michael A. Silva, senior vice president/group manager, Comerica Bank, San Francisco. “This will ensure continuity if your primary contact leaves his or her position.”

Silva notes that not all banks are created equal. “Different banks have different credit-related hot buttons. If you’re looking for a new bank, understand what factors they place importance on. After you’ve made a decision, it’s important to maintain a backup relationship with another bank. Banks get acquired all the time, bankers leave, and issues can arise. What was once a great relationship may no longer be. Keep an alternate bank in the wings. This will also ensure that you’re getting market pricing and market structure in your financing.”

Smart Business asked Silva for pointers that borrowers can use when embarking on a relationship with a commercial banker and how to get the most out of an ongoing relationship.

How should a company begin to evaluate potential new bankers?

Understand the bank’s hot buttons. Where does it have the ability to bend? Where can’t it bend? Talk to its references — other clients that the bank will agree to have you speak with. Ask the references tough questions. How did the bank react when times were difficult? What was its level of responsiveness? Ask about their experiences with other bank products and services outside of just credit.

Find out what type of emphasis the bank puts on the balance sheet. For some banks, the balance sheet is important. For other banks, the balance sheet is not as important, provided the cash flow is sufficient to service debt.

Keep in mind that you shouldn’t trade price for structure and responsiveness. Loan pricing is certainly important, but if you negotiate all the bank’s profitability out, the bank may be compromised in terms of the service or flexibility it can provide.

It’s important to think at least one year down the road when evaluating the size and capabilities of a bank. It takes a great deal of time and effort to develop and build a relationship on both ends, so you don’t want to outgrow the bank in a year.

You mention relationships. Why are they so important?

Making yourself known is important for many reasons. For example, when you need additional financing or you’re having problems with cash flow, you want the bank to understand your business and your management style. You want to be more than just a name on a credit memorandum. Therefore, I suggest that clients develop relationships up the chain of command at their bank. Get to know your banker, his boss, and her boss. This will also help ensure continuity if people move on to other positions or leave the bank.

How can a company ensure a positive working relationship with its bank?

Communicate. If you’re not happy with a product or if you’re having other problems with your bank, don’t let it build up. Many times, blow-ups are the result of many things that have happened over a period of time that didn’t seem very important at the moment. Your banker wants to know about the problems so he can deal with them on a real-time basis.

Additionally, talk about issues in your business as they occur. Bankers hate surprises. They certainly don’t expect you to have all the answers, but be communicative and telegraph issues as they develop. This will go a long way should hard times hit down the road — or when good times result in the need for growth financing.

Finally, refer business to your banker. If you believe your bank is supportive of you, be supportive of it.

How important is it to find a banker with specific experience in a given industry?

In a perfect world that sounds good, but in reality, most bankers are generalists. You want a smart banker who is savvy enough to learn your business and who will be an advocate for your organization within the bank. Evaluate the skill sets of the banker. How long has she been there? How long do you expect her to stay there? What will happen if she leaves? What do her other clients tell you about her?

How can a banker help a company grow?

Take time together to explore all the products and services your banker can bring to bear. These might include an expanded line of credit to finance accounts receivable or inventory; real estate financing to obtain a building; trade finance to begin importing or exporting; and even private banking. There are plentiful opportunities, but you need to communicate in order to uncover those that will best benefit your business.

MICHAEL A. SILVA is senior vice president/group manager at Comerica Bank, San Francisco. Reach him at (415) 477-3274 or