Choosing the right bank is critical in
today’s gloomy economic climate.
As credit markets tighten, it is more important than ever to have a banking
partner who can provide the financial
resources necessary to help you grow
your business.
This decision should not be made in
haste, however. Switching financial institutions is one of the most important decisions that any company will make.
“Prior to making a banking change, a
company should be absolutely certain
that the relationship is over and that
options are better elsewhere,” says
William Phillips, senior vice president
and group manager at Comerica Bank.
“Careful consideration should be paid to
a business’s current circumstances given
the financial markets today and what the
upside to making a change would be.”
Smart Business spoke with Phillips
about selecting a bank in uncertain times,
how to most effectively make a transition
and the importance of communication.
What type of service and performance standards should businesses expect from banks?
Much has changed over the past three
months. For banks today, there is a premium on liquidity, capitalization and balance sheet strength. Savvy business owners should know the financial health of
their banking partners. Beyond that, businesses should expect their bank to offer
comprehensive financial services, including cash management services, treasury
management products and a wide array
of lending products. Lending products
can range from loans to finance a business and loans to finance asset purchases
to loans to finance property purchases.
You need to look further than whether the
bank has basic lending capabilities; it
should have all the products and services
necessary to develop your business.
How can a company benefit from teaming up
with a bank that offers a multitude of financial services under one roof?
Working with a bank that can meet all
of your needs allows you to improve
internal efficiencies. By leveraging one
organization’s talent pool and the products and services it offers, you don’t
need to seek out additional financial
institutions. Having one bank and point
person negates the need to retain additional staff to juggle multiple relationships, procedures and policies that can
vary from one financial institution to
another.
Why is it so important to look for a bank that
has a history of supporting its customers
through various business cycles?
It is essential to partner with a bank
that is going to support its customers in
both good times and bad. You want to
find a bank that is consistent and reliable in all different business cycles.
Avoid financial institutions that aggressively seek to build customer relationships with below market pricing and
fees when times are good as they tend to
indiscriminately dump customers when
portfolios become risky and markets
turn. The key is to find a stable institution that has proven itself through both
prosperous and lean times.
How can a company most effectively transition from one financial institution to another?
First, companies need to seek out the
advice of their financial advisers,
whether they are attorneys, CPAs, neighbors, colleagues or friends, and familiarize themselves with the different financial institutions in their geographic area.
Lending institutions have different tolerances for risk and size and have specialties and expertise that may be unique to
a certain industry. Company leaders
should find the time to meet with banking professionals that they know on a
personal level or who have made
inquiries about servicing their business.
It is important to develop relationships
and have a backup plan to avoid a costly
and disruptive transition. Without a plan,
financing options become very limited
and expensive. In some cases, when
businesses depend on outside financing
for day-to-day cash flow, the result can
be disastrous.
How important of a role does communication
play in sustaining a positive working relationship?
Communication is everything. If you
don’t have communication in the relationship, then it is more of a transaction
than a partnership. Should a problem
arise, you want to be sure that the people you count on to support the business
are part of the team and are in the loop
as far as key developments, changes and
strategies go. Open, candid communication helps grow and foster relationships,
which is extremely useful when issues
arise, particularly during troubled times.
Banks like Comerica that provide financing and cash management services play
a critical role in the success of a business. There has to be trust, respect and
honesty.
WILLIAM C. PHILLIPS is senior vice president, group manager at Comerica Bank. Reach him at [email protected] or
(562) 590-2512.
