The idea of specialization in financing is not too different than specialization in, say, the medical field — turning to a medical specialist who has experience treating a particular injury or illness versus seeing a general physician. In each case working with someone whose concentration is highly specified can be of great benefit.
John Hart, a senior vice president and Ohio market manager at U.S. Bank Commercial Real Estate, says there is good commercial real estate activity in the region, and expects the pipeline of projects will remain strong into 2015.
In an environment of steady activity, it’s important that businesses find the right banking partner to help them see projects through to completion. But many businesses get hung up on deal terms, forgoing a partnership for better rates.
“Banking specialists, because of their experience in a particular industry, are better able to keep borrowers apprised of trends, upcoming regulatory issues, changes in capital structures, etc.,” says Hart.
“There’s much more to consider when seeking a commercial loan than just the terms of the deal.”
Smart Business spoke with Hart about industry specific lending and how it plays out over the life of a business/bank partnership.
Why should a business be concerned with anything but deal terms when trying to secure a commercial real estate loan?
Surety of execution in a timely fashion is an important consideration for loan candidates — the ability of the bank to do what it promises and execute in a timely fashion.
There are many touch points during the course of a construction or development project. Banks with the right expertise can help guide clients through the process appropriately.
What services might be missed if the exchange becomes transactional?
When the loan process becomes completely transactional there’s little or no opportunity for a bank and a client to develop a full relationship. That’s important because a good banker can become a trusted adviser to a borrower. They have a chance, through the deal, to get to know a client’s business and its borrowing strategy, which allows banks to become better in tune with the situation and help borrowers achieve their goals.
If a banker and a client are just completing a transaction, that opportunity isn’t there. Borrowers then miss out on the chance to establish a relationship with their banks and receive additional advice from experienced advisers through the course of the project.
Some larger banks that have specialized services are able to bring other resources to the table based on the scale of the bank. Additionally, having a larger geographical footprint can be of benefit to some borrowers because banks of this size often have the scale to help with future development outside of a client’s home base.
What can banks that have a dedicated commercial real estate division offer that banks without one can’t?
Some banks that have a dedicated commercial real estate group are more likely to have industry and client-specific products and services. They have a better feel for the needs of, say, an apartment developer compared with someone who develops hospitality projects.
A specialized banker can bring in dedicated product partners who have specific experience to match the needs of that particular developer on a specific project.
How might working with a bank that has a dedicated commercial real estate division add value to real estate financing?
Someone who knows a borrower’s industry can be far more responsive to the clients needs and issues than more generalized lenders. Specialized bankers are set up to grow with the borrower’s business, handling many loans throughout the business’s life cycle, and are best equipped to deal with the increasing complexity of projects the borrower undertakes as his or her business increases its reach.
Working with a specialist at the outset of a project means having a partner along the way to help the borrower achieve exactly what he or she sets out to accomplish.
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