Consumers can easily compare banks
based on checking account fees,
interest rates and the convenience of ATM locations. Business banking needs
are more complex, so it can be difficult for
business owners to understand the range
of services available from banks and the
value they provide. In fact, companies are
much more likely to work with multiple
commercial banks than they are to work
with multiple providers of other types of
financial services, such as securities firms
and investment banks, according to data
from the Business Banking Board. But
does that need to be the case?
Smart Business spoke with MB
Financial Bank senior vice president Steve
Towne, who heads the bank’s business
banking and retail lending operations, to
learn about the value of business banking
services and how companies can develop a
more productive relationship with their
bank.
What are some ways a bank can help businesses that owners might not be aware of?
Banks add value to businesses by helping
them understand their financial requirements. Take, for example, someone who
wants to borrow $100,000 to expand a
small business. After the banker sits down
with him/her and goes through what the
funds will be used for and how it can produce a return, the banker and the owner
often determine there is a different need.
This also comes up when companies want
to borrow money to buy a piece of equipment. A good banker helps match the need
to the debt structure.
When companies get turned down for a
loan, they go to another bank. It often takes
conversations with several bankers before
the owner realizes that he or she isn’t just
being told ‘no,’ it’s that the loan or requested structure is not right for the business.
Businesses should consider their banker a
trusted adviser, like their attorneys and
accountants, to guide them to the appropriate product and structure.
Bankers also help make owners aware of
all their options. Banking has changed in
the last 20 years in that products that used to be available only to the largest companies are now readily available to small and
mid-size businesses. For example, a whole
range of credit and treasury management
products — such as international letters of
credit, foreign exchange service, ‘positive
pay’ checking for fraud prevention, automated sweep accounts and more —
weren’t available to smaller businesses or
were very expensive. There are also more
information and reporting services available. As technology changes, these services become more cost-effective and available for all businesses.
How can a business compare banks?
Location is a prime consideration, but it
really is about convenience. With the
online banking and electronic services
available today, location is not the only
thing that defines convenience.
You should look for a banker that
comes to you with ideas and shows some
understanding of your business. No one
knows everything, and that applies to
banking services. Entrepreneurs tend to
be strong personalities, so often they’ll
give the bank a list of services they need.
You do not want your banker to be an
order-taker. The banker should look deeper and be prepared to recommend
other services or products that you may
not have considered.
Flexibility is also important. If problems
come up in your business — and they will
if you’re in business for any length of time
— can your banker make changes to your
services to help you address the problems?
You need to ask yourself: ‘How can this
bank help me make money and/or save
time?’
What are the common misperceptions about
business banking?
Small businesses shouldn’t be overwhelmed with preparing voluminous presentations for their banker or other advisers. They should expect their banker to sit
down with them and talk through the
potential opportunities and pitfalls that the
company could face and what actions they
would take.
Generally, companies can only borrow
against an asset. With small businesses,
banks are looking for business or related
assets to cover the loan. Conversely, businesses can borrow against an idea and get
a loan for more than assets; however, they
need to show a track record of performance and potential.
Another is that companies want a loan so
they can hire more people to increase
sales. That can be OK, but a lot of times the
company is actually dealing with an issue
other than revenue. If the business keeps
trying, it can probably find someone who
might loan money, but often it’s not the
right thing for the business. That’s why it’s
important to work with a banker who is a
trusted partner.
As the financial expert on your team, he
or she will help you grow your business,
reach out to new markets, invest wisely
and manage your money.
STEVE TOWNE is senior vice president at MB Financial Bank in
charge of business banking and retail product lending. MB
Financial Bank offers a wide range of commercial banking, business banking, treasury management and wealth management
services. It has $7.9 billion in assets and is one of the largest
locally-operated banks in the Chicago area. Reach Towne at
[email protected].