Regardless of your motivation, changing your business bank is nearly always a time-consuming, stressful and confusing experience. But this does not need to be the case. There are resources and actions that can minimize your time invested and maximize the potential for a positive result and experience.
Smart Business spoke to William Koeth, senior vice president at Western Reserve Bank, about the process of choosing the right bank for your business needs.
Aren’t all business banks the same?
While all banks appear to be pretty much the same, they are not. Bank advertising is designed to create the public impression that most banks can be all things to all potential customers. If you are looking for a bank to handle your consumer needs, stop reading and believe the advertising. Consumer banking has largely become a commodity business. Most of the products and services are the same. However, business banking areas of the lending business have subtle but significant institutional differences.
How can businesses go about the process of determining the best fit?
First, size does not always matter with respect to potential financial institutions. It may be an issue if you have very large or business specific borrowing needs. Absent that, your distance from the decision makers at your bank should be a primary consideration. The more the layers and players in the process, the longer the delay and the higher the likelihood that a decision is being made based largely on numbers. That is not a relationship.
Another issue with a larger financial institution is inherent officer mobility and turnover. When officer change occurs, the customer is left behind to explain his or her business to another account officer, who will eventually move on. Medium and smaller-sized financial institutions tend to be more familiar with their customers. Officer turnover tends to be less frequent and, if it occurs, management tends to be more familiar with the relationship and its history.
Begin the process of looking for your new financial partner by asking other business people who they bank with. Ask if they are pleased with their bank or banker and, if so, why. Unless you are in a business generating cash sales, do not consider branch proximity as a significant factor. The advent of the universal availability of remote deposit has leveled the playing field on the convenience issue. The economics of branch banking and technological advances have changed the competitive landscape and banks are generally no longer pursuing customers with bricks and mortar.
Use your accountant as a resource. They know which banks are consistently in the market place and which ones are customer friendly. Accountants also know which financial institutions are most likely to be comfortable with the nuances of your type of business. Expect your financial adviser to suggest more than one institution. Since your adviser knows you and your business, request a list of questions that you should be asking while interviewing a potential financial partner.
What should businesses look for in a banker?
Look for a banker who displays enthusiasm and who asks probing questions. Remember, that person will be representing you and your company within the bank. Find out if that individual is a member of a team and, if so, who is on the team and what is the level of day-to-day support. Will the person with whom you are meeting be your ongoing account officer or is he or she primarily a sales person. Ask about the loan approval process and what role your new contact plays in the process. Under the ideal circumstances you should be interacting with an experienced and knowledgeable banker who is with a reasonably flexible bank. Ideally that person should also have some familiarity with your legal and accounting advisors.
What kind of information should a business provide to the bank?
Assuming that the initial meeting with a new prospective bank is mutually comfortable and informative, be prepared to deliver a complete package of information about yourself and your business. That package should include marketing and biographical information as well personal and company financial data. Financial data should include tax returns as well as multiple years of fiscal year-end financial statements and comparable interim statements. Any near-term needs such as equipment purchases or plant expansion should be identified. Be prepared to explain what distinguishes your company from the competition. Management depth, skills and industry experience are always of importance to a financial institution. Your ability to communicate and deliver, on a timely basis, the traditional information required to maintain a successful borrowing relationship is highly important.
Price is always a consideration, but it should not be the prime decision point. You have a right to expect good service and support from your banking partner. The best banking relationships are mutually beneficial and are based upon respect and trust.
William Koeth is the senior vice president of Western Reserve Bank. Reach him at [email protected] or (440) 746-6100.
