With the rise of large, global banks and internet banking, the relationship between a company and its banker has virtually disappeared. Gone are the days where a banker was a trusted advisor and an integral part of a company’s team. Unfortunately, the bigger the institution, the less ability it has to form a real relationship with its customers.
At the end of the day, all banks offer comparable products: loans, lines of credit, and private banking services. What differentiates institutions is service. Smaller, relationship-focused banks have a vested interest in their clients and can provide far more than standard products to customers.
The problem with being a small fish in a “Big Banks” pond is that your business doesn’t necessarily matter to the bank as much as the larger fish. This can lead to a cookie-cutter approach to how banks serve their clients and the products they offer. The client can either assimilate to the bank’s offering or leave because your business doesn’t move the needle enough for them to change the bank’s system.
In the construction industry, a project’s success is often dependent on getting a personalized loan tailored to the situation. By banking with a smaller institution that knows you personally and understands your specific business needs, you can create a relationship where out-of-the-box solutions are possible.
When considering taking a risk that’s inherent in any lending situation, a large element of the assessment is the applicant's character. Trust and credibility are built over the length of the relationship and through two parties that have a mutual understanding and respect for the other’s vested interest in their relationship.
Bankers used to be advisors, which is the kind of relationship many businesses desire and can benefit from today. A banker can do so much more than lend money if it is invested in your company and your success. When your banker understands your business, it can help you make smarter financial decisions that align with your long-term goals.
When it understands the “bigger picture,” a banker can take a consultative approach. Many institutions will simply lend the max amount of money its “algorithm” says it can, even though this may not be the wisest decision. If you don't use it wisely, financing can kill a business just as much as it can assist in its success.
In 2008, savvy banks began to pull back on residential construction loans based on what their experience was telling them about the market. At the time, residential loans were running rampant, but clients who heeded their bankers' warning reaped the reward when the housing market crashed, and when most of the large branches temporarily stopped due to the metric-based underwriting that got them into trouble. The smaller institutions that focus on being there for the long-term were there to help.
When looking for a financial institution that values personal relationships, there are several key factors to consider:
- Competency—To serve your needs, your bank should have knowledge and experience within your industry. Banks that understand the construction industry, as well as the associated risks, are in a better position to offer good advice and the right kind of financing based on your needs both now and down the road.
- Personal banker—There should be someone at the bank that is your point person and advocates for all interactions at the bank. Your banker will know your business inside and out and can offer sage advice as well as have full accountability for your account. Personal customer service isn’t found calling a bank’s toll-free number or sending an email. It’s created by building a strong, personal relationship.
- Access—While having a personal banker is imperative, it’s also important to have access to the bank’s upper management team. An open-door policy to executives ensures you have the ear of the ultimate decision-makers when seeking support from your bank.
- Importance—For a bank to understand your company’s needs, you need to be a meaningful part of the business. Avoid being just a cog in your financial institution’s machine.
- Financing expertise—Financing is critical to anyone in the construction business. A bank should have a variety of loan options and the ability to structure solutions that go outside the box, if necessary.
Relationships are never a one-way street. Business owners should also work on their business’s behalf to foster a better relationship with their bank by utilizing the following:
- Communication—Be proactive and transparent in communications with your banker. The bank must know what is going on at your company, especially as it relates to cash flow. Your banker should know what is in the pipeline so it can understand how your resources are being allocated, potential risk factors and predict future needs.
- Success stories—Share good news and good press. Banks like to lend to successful clients.
- Beyond banking—Bankers are human. Don’t be afraid to share personal information, as you see fit, that goes outside the banking realm. At the end of the day, it only helps to let your banker know your ultimate objectives, both personal and in business. Like a financial advisor who builds an investment plan to meet your retirement goals, a good banker will make sure your business has the options available to meet the business’s goals. Choosing a bank that values its relationships above all else means that a bank can offer personalized solutions.