Stop for a minute or two and think back to what you learned about the banking industry during your childhood. Your parents probably introduced you to the concepts of deposits and checks and balances. You learned how to make the numbers work. Now think about what you learned about the industry during your years on campus and in the classroom. Some professor probably lectured to you about loans and liens and interest. You learned enough to earn a good grade and get out in the business world. And what did you learn about the industry after you established yourself in that world? You probably learned that a relationship with your banker is important, that surprises are bad and that communication is the key to just about everything.
Well, good. Keep all of that information in mind because so much of it remains relevant and important today. But so much more of the information that you learned during your childhood and your education and your years in business is now better left in the past, thanks to the lingering memories and results of the financial fiasco that rocked the economy for the better part of two years.
As we climb out of the fiscal wreckage of 2008 and 2009, the banking industry is in the middle of a new landscape. After what seemed like one bank sale, merger or closure after another, there are now fewer banks across the nation. And after thousands and thousands of businesses defaulted on their loans, banks of all sizes became more prudent in their lending practices.
The financial future continues to improve, but the present might be difficult for some business owners.
“There is an approach of going back to basics,” says Jeff Douglas, executive vice president, commercial banking, Fifth Third Bank. “Today, it’s really about cash flow, about margins, about how well you’re managing your expenses. From the banker’s side, it’s about cash flow coverage, about assets. We’re operating in a time of less uncertainty than we had six to nine months ago. There are still some issues out there that give people pause, but it feels like it’s at least stabilized. It doesn’t feel like it’s getting worse.
“Banks are in much better shape than they were. We’re out there; we’re looking for new business. But it’s all about that basic blocking and tackling, what the financials tell us and how the management teams have responded to the challenge. We are going back to basics in the way we’re trying to approach things.”
