All banks will tell prospective clients they can serve every need. But proper preparation and key questions will reveal whether a bank is the right one for your business.
“Banks say they do everything, but you have to find the institution that shares your priorities, and focuses resources in areas important to you,” says Matt Christensen, senior vice president and regional manager at Bridge Bank.
Smart Business spoke with Christensen about the process of choosing a bank.
Why is it important that a bank knows your industry?
It’s particularly important if your industry has unique risks. An early-stage company in the technology space will have challenges that are not common in other sectors. After a round of seed funding, it has to show proof of concept. Then it needs to show the ability to generate revenues. Most lenders look for companies that have two or three years of profitability, are steady and have products that are not prone to obsolescence. Technology companies are an entirely different breed. Unless the prospective bank has a business unit dedicated to meeting the unique needs of tech companies, there are probably other options to consider.
Health care is another industry with similar concerns. Businesses might be receiving payments from federal agencies, and they’re facing a regulatory environment that’s ever changing. Industry knowledge can even be useful to something like a car dealership, where certain banks are set up specifically to work with them.
These examples might be extreme, but as you get closer to the extremes it becomes increasingly important for businesses to carefully consider what bank to use.
How can you verify that the bank has the necessary experience?
When interviewing bankers, ask for representative examples of companies they’ve worked with in the industry. Inquire about challenges they perceive within the industry. If they can provide a list of businesses they’ve worked with and intelligently discuss industry challenges, it’s probably a good fit.
During the process, it’s important to go up the line and ensure that the credit apparatus understands lending into the technology space, for example.
Trade organizations also are good sources of information. Find out which banks are active and check their reputations within the industry.
How can you get the most out of interviews with prospective bankers?
First, ensure that the conversation doesn’t default to the banker asking questions about your company. Bankers are trained to formulate questions and can monopolize the discussion by conducting their due diligence and uncovering sales opportunities.
Prepare for the interview by developing questions that will reveal the bank’s priorities. Make sure they prioritize your type of company and products. If your business model includes aggressive growth and relies heavily on debt, ensure the bank does that routinely. Some banks prefer to collect deposits and lend out conservatively.
Banks, especially the large ones, offer every service you might need. However, they have areas of emphasis. They prioritize certain markets in which they’re eager to expand. Find a marriage between your needs and the bank’s priorities. They will not say your industry isn’t emphasized, but you can look at the bank’s financial statements to check its assets and where loans are concentrated.
Does having access to decision-makers matter?
It’s an indication that the bank values you as a client and you are a priority. Also, you want to know the sensitivities of the people making decisions. When you face a challenging situation or have an opportunity, will they be open-minded or are they going to quote policy? If you’re considering an acquisition to double your size, how would they structure a credit facility to accomplish that goal? Ask how they’ve worked with other companies and check references to determine how they’ll work with you.
Banks say they do everything. It’s important to find the people with the experience and skill sets that fit your priorities — a relationship manager and banking team that will advocate for you when you need their assistance. •
Matt Christensen is a senior vice president and regional manager at Bridge Bank. Reach him at (415) 508-2505 or [email protected].
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