Whether or not you are satisfied
with your current bank, abundant
media attention covering the financial industry may inspire you to shop
around. When was the last time you “interviewed” banks? When was the last time
you considered your own business goals
in relation to your bank’s objectives for
the future?
“Before you make any moves, evaluate
your business in terms of size, life cycle
and growth expectations,” says Craig
Johnson, president and CEO, Franklin
Bank, Southfield, Mich. “Once you figure
out who you are, so to speak, you can
focus on choosing a financial institution
with products and services that complement your needs.”
Prior to starting a new banking relationship, consider Johnson’s advice to Smart
Business for selecting an institution that
will serve your business years down the
road.
What ‘inside work’ must business owners do
to be prepared to ask the right questions?
Before you do anything, evaluate your
own business. Where are you today, and
where do you see the company heading in
the next three to five years? What will revenue look like? Will you expand your facility, move to a new location, potentially
add more products to your lineup or hire
more employees? What are your immediate growth goals, and what are your objectives for sales/growth in five years? Will
your lending needs be great, or is acquiring capital not an issue in coming years?
This is important because you want to
make sure the new bank you partner
with is equipped to handle your lending
needs down the road. Be sure to ask this
question.
Finally, spend some time defining your
company culture and business philosophies. The financial institution you
choose should share these mindsets. You
will share intimate business information
with your banker. You should feel comfortable and ‘on the same wavelength’ as
him or her.
What mistakes do business owners make
when choosing a new bank?
The bank on the corner or across the
street from your office isn’t necessarily
the best match. In real estate, location is
king. In banking, convenience is critical,
but that doesn’t necessarily mean the
bank should be located within eyeshot of
your headquarters. You want to partner
with a bank that provides the best service
and products you need.
Should you decide to do business with a
financial institution across town, you
could always retain a payroll account at a
neighbor bank for the convenience of
employees’ with payroll accounts at your
business. With the ease of today’s electronic banking, you can seamlessly transfer dollars online from one bank to another. This arrangement is necessary in some
instances, but ideally, once you decide to
move your banking business, you should
move all of your business, including loans
and deposits.
How important is pricing?
Pricing lures business owners to the
front door of a bank, but prices are deceiving. Is the bank truly offering the level of
service and product portfolio that your
business requires? As with anything, you
get what you pay for. Be sure to shop more
than one bank. Interview several prospects
and do not rely on a single referral from
your accountant or attorney. Do check out
the bank your advisers suggest. Don’t limit
yourself to that ‘one.’ Also ask peers in the
business community who they bank with
and why. During networking events, pose
the question: Who is your banking partner? Most business owners are open to
providing candid feedback. From there,
visit several banks that can fulfill the
objectives you identified for your business. Just because a bank coins itself as
‘business friendly’ doesn’t mean it will
retain that philosophy. Look for a bank
that communicates a consistent message
about its culture and philosophies.
Who should be involved in choosing the
bank?
Usually, the CEO or business owner,
along with a chief financial officer or lead
accountant at the business, will be
involved in the banking decision. Be sure
that everyone is on the same page, priori-tizing relationship, cultural fit, products,
services and the financial health of the
bank. When visiting a bank, speak with
more than one representative. Talk to the
senior lender, a retail manager or someone in treasury management. Ask to meet
with a member of senior management. Be
sure each associate communicates the
same ideas and that you ‘click’ with more
than one person at the bank. In case of
turnover, you want to develop relationships with several associates who will
take the time to understand your business
and needs.
CRAIG JOHNSON is president and CEO of Franklin Bank in Southfield, Mich. Reach him by calling (248) 386-9860 or e-mailing
[email protected].
