Each client in private banking has a relationship with his or her own private banker. Beyond credit needs, private-banking clients have available and may draw upon other specialists like securities/investments, trust services, insurance and financial planning.
Smart Business spoke with Mark Nakamaru, a senior vice president and group manager of private banking at Comerica Bank, about what types of services private bankers provide, how individuals and businesses alike can benefit and what factors to consider when looking for a private banking partner.
What are some of the services that private bankers provide?
Their primary focus is to address the financing needs of their clients, although in some cases, this extends to the businesses that they are associated with. Service-related companies such as law firms, CPA firms and medical practices are some examples of private banking businesses. Private bankers provide one-stop banking including customized credit facilities, a full array of deposit products, securities investments, asset management, insurance and financial planning. One private banking relationship manager can help deliver all the financial needs for both an individual and his or her business.
How can a company benefit from private banking lending options?
With any business, there is a need for a multitude of services and products. We provide a wide array of services such as traditional depository products, treasury management, merchant services and foreign exchange, to name a few.
Also, a company benefits from a private banker’s ability to customize service needs, as well as banking the principals of the company. Private bankers have the ability to underwrite, structure and approve loan requests in-house, providing quick decisions and customized loans for clients.
How do stock option loans work?
Let’s say a senior executive of a company has stock options that are coming due in six months. He has a tremendous opportunity today on an investment he wants to take advantage of. We can structure a loan for him today with repayment to come from the stock options he will eventually exercise. There is some risk to this. He may not want to exercise his stock options if the stock price drops below the strike price. But we will look for ways to mitigate this risk and structure this loan for him.
How can a company use a mortgage as collateral for a loan?
We can establish a line of credit for a business using the equity in the owner’s personal residence or commercial building as collateral. This may provide a lower interest rate and extended terms on the line of credit. A start-up company, for example, could benefit from this type of loan as it provides additional collateral.
The process to establish this type of loan mirrors the steps one would take to borrow individually for an equity line of credit.
What types of questions should one ask when looking for a private banking partner?
I would inquire about the approval process for loan requests. Does the prospective partner use loan centers for approval or does it have the ability to underwrite and approve loans in-house? There could be advantages or disadvantages with either, depending on your needs.
Another key issue is the lending limit of the bank. If it is a small community bank, there are restrictions as to how much money it can lend. A client who is looking for a large credit facility would not be well served by a bank with a house limit that cannot match his credit needs.
The lending experience of your private banker should also match your credit needs. A real estate investor, for example, should ask if the bank actively participates in this market. If so, your private banker should have the real estate experience to help facilitate the real estate loans you require.
Remember, all banks will tell you that they provide great service. Before choosing a bank and/or private banker, have a face-to-face meeting. The candidate should be quite convincing in its commitment to back up its claims.
MARK NAKAMARU is senior vice president and group manager for private banking at Comerica Bank. Reach him at (714) 435-3963 or firstname.lastname@example.org.