Don’t you wish you knew what happened behind the scenes at a bank after you fill out your loan application? While you a wait for a response, who are the players that process, evaluate and, hopefully, approve your request for funding?
Whether you require a loan for real estate or new equipment, understanding how the process works at a bank can help you determine whether a particular financial institution is the right partner to manage your request.
“Not all financial institutions handle the lending process the same way,” says Jeff Skocik, vice president and manager of Commercial Lending, Brentwood Bank in Bethel Park, Pa. “Business owners must decide what type of relationship they want to have with their lender. Are they looking for a bank to handle a transaction? Or, are they looking to establish a relationship with a full-service lender?”
Smart Business asked Skocik to discuss the relationship advantages a lender can offer and why flexibility in lending can open doors to other valuable services an owner may not know about.
As a lender, what misconceptions do clients have about your profession, and how do you address those?
One misconception is that all banks handle the loan process in the same manner. When choosing a lender, borrowers need to be cognizant that different lenders take different approaches to the lending process. At some financial institutions, lending is segmented. The size and type of project may determine how your project is handled in terms of negotiation, underwriting, approval, closing and servicing. Your project may need to be processed through several groups before it is completed.
Other institutions may take a more hands-on approach to lending. Commercial loan officers work one on one with their clients. They make sure that nothing falls through the cracks and are involved in every aspect of the loan process: consultation with the investor, negotiating terms and conditions, financial statement analysis, underwriting and presentation, decision-making, closing the transaction, and servicing the client after the closing.
Why is it beneficial for business owners to work with lenders who focus on building relationships?
By opting for the hands-on approach, you will have the opportunity to work with a relationship manager who will take the time to understand your business and financial needs. Relationship managers are involved with a project through the entire process. They represent a business to the bank for purposes of loan approval and other matters. Also, they will retain loans in their portfolios rather than handing them off to another associate. This means you can rely on the same person who originated your loan to answer questions or address concerns later.
Does this type of relationship allow the lender to be more flexible?
Because of segmentation, the loan process at some financial institutions tends to be more transaction-oriented with defined processes and parameters for decision-making. The overall situation is not always evaluated. The client either meets the qualifications designated by the bank or does not. Also, the lender/originator does not have any significant involvement in the underwriting and decision-making process. He or she is there to help collect information and prepare the required paperwork, but then (like the borrower) the lender/originator has to wait for the loan to be processed through the system and for a decision to be made.
However, a lender who serves as a relationship manager really gets to know you and your business. The lender is involved and drives the process, so it is more personal. Your loan application is more than numbers it is a ‘case’ that the lender follows until a solution is provided which is the loan. Additionally, this type of lender has more flexibility and is positioned to assist you if the situation changes and some of the original terms and conditions of your request need to be revisited.
Besides flexibility, what are other ways a bank relationship benefits the borrower?
A relationship-driven lender is looking at your overall financial picture. Besides providing more customized lending solutions, a relationship manager can help you meet financial goals by offering suggestions on other products and services that meet your needs. Because the lender is in tune with the dynamics of your operation, he or she can also serve as a trusted adviser.
What is your advice for business owners seeking a lender?
Consider how you want to handle your project. Are you looking for a relationship, or do you want to simply complete a transaction? Do you want to consult with a professional before applying for a loan? If so, choose a bank that will align you with a relationship manager who can serve as a resource and advocate during the process.
Finally, think about the future. This probably is not the last loan, financial product or service you will need. Is it important for you to work with the same lender? Consistency is the key to building a strong banking relationship. The familiarity of working with someone you trust and who will be there to anticipate your business needs can be invaluable.
JEFF SKOCIK is vice president and manager of Commercial Lending for Brentwood Bank in Bethel Park, Pa. Reach him at email@example.com or (412) 409-9000.