Developing a Banking Relationship | Friday January 30th, 2004 | |
Have you developed a profitable relationship with your banker?
Small business is highly valued by today’s bankers who recognize that small-business owners create new jobs and products at a faster rate than Fortune 500 companies. Banks go out of their way to fashion new products, new services and new ways to reach small-business owners. You, the small-business owner, can use this focus on small business to craft a personalized, banking relationship that works to your advantage.
Begin by comparing bank services and products. Even if you don’t need specific services now, you could grow and, later, need a bank with an extensive products and services. Someday you may need international capabilities, letters of credit or other specialty services. Knowing which bank to turn to on the spot will ensure your business can operate smoothly and without delays as you grow.
If you need personal banking and services for your employees, ask about these services also. By placing them with the same bank, you engage in “relationship banking” and come closer to reaching the “magic number” in banking products and services: three. Bankers typically feel that once they have “sold” you three services or products, a relationship develops, thus increasing the bank's comfort level with you and your business.
Price doesn’t vary much from bank-to-bank on these ancillary services and products. But be sure to review them and compare, especially the services you are using for your company. Once you establish a relationship, you may be able to negotiate future favorable changes to the schedule of fees and charges. But don’t count on it in the beginning.
Next, get referrals from existing customers. Ask existing business customers about their relationships with the bank. If they have complaints or criticize the bank or its employees, you might want to move on to other banks. But keep in mind that faltering businesses sometimes run into difficulties with banks. Consider the sources of your information and make sure that any negative impressions they might have about the bank are not colored by their own business problems.
Once you have chosen a bank and are satisfied with the service and relationship, refer that bank to other companies you know. This helps solidify your position with the bank. You become more than just a customer, but also a source for more business and referrals, too. Banks often pride themselves on the percentage of new business they receive from satisfied customers who refer others. A banker is just like you in this way, eager to get new business from referrals and to grow.
Also, remember that bank officers routinely receive training in the basics of sales techniques, active listening, and negotiation. The features and benefits of myriad bank services and products are part of their required body of business knowledge. They constantly look for opportunities to sell these products to your company. Knowing this, you can become a more valued bank customer and receive preferred banking treatment if you help the banker succeed as a sales representative.
Your Relationship Exists with Your Banker, not the Bank. Although technically your company may have an account with a specific banking corporation, the true business “relationship” exists between you and the bank officer in charge of your account. Relationships are person-to-person, not company-to-company. Nothing illustrates the truth of this better than what happens when changes in key personnel occur at your business or at the bank. Suddenly, the business relationship is crucially altered.
Thus, establishing a good rapport between you, the entrepreneur, and your banker is essential. Get to know your bank officer and your officer’s superior.
Banks often experience high officer turnover, therefore, you should always develop primary and secondary relationships. These contacts with other people in the bank can be useful, if your primary officer is on vacation or absent for a long period for some other reason.
Banker visits help nurture your relationship. Like other entrepreneurs, you no doubt hear or read repeatedly that you should invite your banker to your place of business. But most small-business owners, crunched by myriad tasks and responsibilities, rarely do it. They are missing out on valuable opportunities. Don’t miss out yourself.
Whenever possible meetings should be at your place of business to better focus on you and your business needs. Set up an appointment with your banker ahead of time and take the initiative to set the agenda. This gives the banker some idea of what you want and preparation time to begin reviewing your files and account information.
Home turf is important, especially later when negotiations take place. It's O.K. “do lunch” every now and then, but not more than quarterly. Don't ask for a loan at these lunch meetings; just talk to your banker about generalities, such as new developments and industry trends. Be sure to use this time to ask about how the bank is doing, too. Talk about the level of service you receive from the bank. If the service could be better, give specific feedback and suggestions for improvement.
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