“The gains of trust-based relationships can and do accrue to both parties.”– Charles H. Green
The quote above by Charles H. Green applies perfectly to the tremendous potential inherent in a trusted banking relationship. Benefits accrue to the business, it’s owners/managers, and to the bank/banker. Here are some of the ways bankers can deliver value with a partnership mindset:
The Whole Team: Perhaps the best way a business can benefit from their banking relationship is knowing that there is a team behind every commercial banker. And not just the immediate team members in related areas such as deposits or retail banking. The bank’s senior management team is usually comprised of bankers who were once ‘on the front lines’, with the added benefit of additional years of banking experience. It’s not uncommon for market managers, chief lenders, or even the bank’s president/CEO to attend a meeting with an existing or prospective customer. This a tremendous resource to have available!
Information Source: Your banker is probably responsible for tens of clients, and the bank itself, if it is a commercial bank, likely has hundreds or more. Odds are those clients will span many industry sectors. In the normal course of serving clients and prospecting for new relationships bankers receive a lot of first-hand information. Aside from proprietary information or trade secrets, most bankers are happy to share (for free) what they’ve learned. A fifteen-minute conversation with your banker can bring you up to speed on how the local economy is faring, what trends other business owners are seeing, what challenges others are facing and how they are attempting to resolve them. Add to this list the goings on of local politics, legislative proposals and other business developments and the value of that conversation rises dramatically. Your banker benefits too from receiving information on your business and the specific challenges and opportunities you see locally
Introductions / Networking: Because of their wide and deep network your banker can provide you with referrals and introductions. Most of the time all it takes is to ask. Facilitating conversations, connecting buyers and sellers, and forming mutually-beneficial relationships are win/win scenarios for all involved and the local economy. And most of the time if a banker does not have an immediate point of contact his/her internal network of bankers usually will.
Strategic Planning / Improvements: Many businesses find it beneficial to include their banking team in their strategic planning discussions. Your banking partner can (and should) earn their keep, and assistance with long-range planning is one of those areas. While needing to be mindful of lender liability laws most bankers are happy to point out ways in which owners/managers can improve their businesses. They can bring to the table their experiences and a ‘playbook’ of ways other businesses have faced similar challenges or found new opportunities. Sometimes a simple clarifying question from someone knowledgeable about a business but not involved in day-to-day operations is all it takes to spark an insight.
Risk Assessment: Taking on all the downside with no upside potential means banks look to risk first. They take a critical eye toward ways the business might encounter difficulty, incorporating hard lessons from times past as well as from the vantage point of seeing many businesses succeed and fail. Sometimes a risk assessment can come across as a negative, especially if it means highlighting an area for management to change. This risk assessment is not meant to point out ways in which a manager is doing a poor job or to otherwise unnecessarily critique a manager/owner. It’s important to remember that the bank has a vested interest in seeing your business succeed. We’re on the same side of the table. A meaningful conversation about what risks the bank is seeing will help strengthen your business in the long run.
It’s important to remember that the bank has a vested interest in seeing your business succeed. We’re on the same side of the table.
Stress Testing: Integral to the assessment of risk a bank can “stress test” your business to find hidden risks and/or find ways for you to improve operations. In the normal course of underwriting a new relationship, banks will take a business’s financials and perform certain analyses, looking at trends, margins, etc. After looking at actual data we might run various “what-if?” scenarios. What if sales decline by 10%, 25%? What if margins narrow? What if certain expense categories increase? What we’re looking for is if the business can still repay its debt under adverse conditions. A business owner can benefit greatly from knowing what the banker is seeing in these areas. The best part of all is it does not cost you anything but the time to have such a conversation with your banker.
Conclusion: Maximizing the value of your banking relationship is best achieved by treating your bank as a trusted partner in your business and viewing your team of bankers as knowledgeable consultants. Yes, interest rates and the price of other services must be competitive, but they are not the end of the story. As Warren Buffett is fond of saying, “price is what you pay, value is what you get”. It is worthwhile to assess your banking partnership from time-to-time to make sure it is delivering the value you expect.If you would like to experience the benefits of working with a trusted team please don't hesitate to contact us.
AVP, Commercial Loan Officer
(603) 894 - 7823
234 North Broadway - 2nd Floor
Salem, NH 03079