Selecting a new bank is a task that
should not be taken lightly. It is key,
says Mike Silva, senior vice president and group manager of Comerica Bank, to
search for a bank that will pay attention to
your company’s individual needs.
“For midsized businesses, there are no
cookie-cutter deals; there are nuances to
every midsized business owner’s financing
needs. Selecting a bank that provides flexibility and customization for these needs is
extremely important,” he adds.
Smart Business spoke with Silva about
selecting a bank in uncertain times, the
importance of having a backup plan in place
and the benefits of open communication.
How should a company go about selecting a
bank in uncertain times?
Now more than ever, it’s important to do
your homework as to the financial where-withal of your bank. It’s hard to pick up a
paper and not read about banks with problems, failed banks and banks where the
Fed has forced acquisitions. In this environment, it’s important for clients to do
their homework about the creditworthiness of their lender.
Why is it so important to look for a bank that
has a history of supporting its customers
through various business cycles?
We live in a very cyclical world, and there
have been a lot of new players, including
foreign banks and nonbank lenders, who
have entered the commercial bank lending
arena in the last five years. Just as easy as it
was for them to get in, it is as easy for them
to get out of the lending environment. It’s
very important to find a lender that has
extensive experience in the commercial
lending arena and has a deep dependence
on revenue and income from that area.
Banks that focus on other things — but
dabble in commercial lending — find it
pretty easy to get out in an economic downturn. Other banks that are dependent on
commercial lending for revenue can’t exit
because it is such an important part of their
business. As a result, they are much more
experienced and are better positioned to
ride through various economic cycles.
What type of service and performance standards should a business expect from its
bank?
You don’t ever want to be your bank’s
biggest client or its smallest client. You
want to make sure that you are an important enough client that you get good service, but not so large that your bank may be
hamstrung in terms of delivering credit or
other products and services that you need.
Every business owner should have a
banker who understands his or her business and who consistently underwrites to
the same standards. This ensures that
changing credit policies or a changing economic environment do not have a significant impact on the way that you borrow
money.
Once a selection has been made, what steps
can a business take to maximize the relationship with its bank?
It is very important to be openly communicative and to share both good news and
bad news on a timely basis. From a business owner’s standpoint, it is critical to
develop annual projections and to manage your business to those projections. When
there is a negative variance, talk to your
banker earlier rather than later. I have had
clients who, in certain instances, don’t
want to talk about a problem until they can
figure out a solution. Sometimes the problem festers or grows and, in some cases,
there is no timely answer. We find that it
would be much more helpful for us to be
supportive of a client in such a situation if
we knew what was going on in a timely
fashion.
How can a company most effectively transition from one financial institution to another?
Companies should have a backup banking relationship in place. The banking
industry is currently experiencing unparalleled turmoil. If you are beholden solely to
your bank and it has issues outside of your
control, the lending relationship that is so
crucial to you could disappear overnight.
This can happen even if you are the best
customer your bank has ever had. By
developing a relationship with a backup
financing source — someone who knows
you almost as well as your existing bank —
you are not starting from scratch if there
are issues.
How important a role does communication
play in sustaining a positive working relationship?
Communication plays an extremely
important role. Businesses should communicate up and down the chain of command
with their bank. Clients commonly complain about the turnover among their
bankers. Unfortunately, this is often the
nature of the beast, so it is important to
maintain dialogue and be known not only
by your banker but also by his or her boss,
in case you need something special or you
need someone to champion an exception
in the organization for you.
MIKE SILVA is senior vice president and group manager of Comerica Bank. Reach him at (415) 477-3274 or [email protected].
