Each client in private banking has a
relationship with his or her own
private banker. Beyond credit needs, private-banking clients have
available and may draw upon other specialists like securities/investments,
trust services, insurance and financial
planning.
Smart Business spoke with Mark
Nakamaru, a senior vice president and
group manager of private banking at
Comerica Bank, about what types of services private bankers provide, how individuals and businesses alike can benefit
and what factors to consider when looking for a private banking partner.
What are some of the services that private
bankers provide?
Their primary focus is to address the
financing needs of their clients, although
in some cases, this extends to the businesses that they are associated with.
Service-related companies such as law
firms, CPA firms and medical practices
are some examples of private banking
businesses. Private bankers provide one-stop banking including customized credit facilities, a full array of deposit products, securities investments, asset management, insurance and financial planning. One private banking relationship
manager can help deliver all the financial needs for both an individual and his
or her business.
How can a company benefit from private
banking lending options?
With any business, there is a need for a
multitude of services and products. We
provide a wide array of services such as
traditional depository products, treasury
management, merchant services and foreign exchange, to name a few.
Also, a company benefits from a private banker’s ability to customize service needs, as well as banking the principals of the company. Private bankers
have the ability to underwrite, structure
and approve loan requests in-house, providing quick decisions and customized
loans for clients.
How do stock option loans work?
Let’s say a senior executive of a company has stock options that are coming
due in six months. He has a tremendous
opportunity today on an investment he
wants to take advantage of. We can
structure a loan for him today with
repayment to come from the stock
options he will eventually exercise.
There is some risk to this. He may not
want to exercise his stock options if the
stock price drops below the strike price.
But we will look for ways to mitigate this
risk and structure this loan for him.
How can a company use a mortgage as collateral for a loan?
We can establish a line of credit for a
business using the equity in the owner’s
personal residence or commercial building as collateral. This may provide a
lower interest rate and extended terms
on the line of credit. A start-up company, for example, could benefit from this
type of loan as it provides additional
collateral.
The process to establish this type of
loan mirrors the steps one would take to
borrow individually for an equity line of
credit.
What types of questions should one ask
when looking for a private banking partner?
I would inquire about the approval
process for loan requests. Does the
prospective partner use loan centers for
approval or does it have the ability to
underwrite and approve loans in-house?
There could be advantages or disadvantages with either, depending on your
needs.
Another key issue is the lending limit
of the bank. If it is a small community
bank, there are restrictions as to how
much money it can lend. A client who is
looking for a large credit facility would
not be well served by a bank with a
house limit that cannot match his credit
needs.
The lending experience of your private
banker should also match your credit
needs. A real estate investor, for example, should ask if the bank actively participates in this market. If so, your private banker should have the real estate
experience to help facilitate the real
estate loans you require.
Remember, all banks will tell you that
they provide great service. Before
choosing a bank and/or private banker,
have a face-to-face meeting. The candidate should be quite convincing in its
commitment to back up its claims.
MARK NAKAMARU is senior vice president and group manager for private banking at Comerica Bank. Reach him at (714) 435-3963 or [email protected].