DEVELOPING LASTING BANKING RELATIONSHIPS By Barry Cohn Many business owners and managers today express concerns with their company’s banking relationship. These concerns are legitimate. The financial services industry is going through a massive restructuring due to mergers and acquisitions. There were over 14,000 banks in the United States five years ago. Currently, there are approximately 9,000 banks, and it is predicted that there will only be 2,000 banks in the country by the end of 2003. Ten years ago, who would have contemplated a time when First Interstate Bank, Security Pacific National Bank, Great Western Bank, and Home Savings of America, to name a few, would cease to exist? Since this trend in bank merger-mania will be continuing, it is important for owners and managers of both large and small businesses to understand how to identify a good bank for their company and how to develop an ongoing relationship where their bank and banker anticipates their business needs and helps the company grow. Businesses, depending on their size, have many choices of banks that can help them with their lending, cash management, and investment requirements. There are small community banks that specialize in a geographic area, niche players that target specific types of companies, medium sized banks that like small business customers and large banks that try to do it all. If you choose to work with a small community bank, recognize that the bankers you meet are working with consumers on car loans, small business loans under $100,000 and often larger companies that like a local flavor. If your company is large enough to borrow in excess of $2 million, you might even be reaching that bank’s legal capacity for making loans. There are a number of niche banks that specialize in small to medium size companies and loans between $100,000 and $5 million. These banks may focus on the medical industry, real estate developers, SBA loans, credit card processing or even portions of the entertainment industry. A few of these medium size banks just bank companies or high net worth individuals. The large banks usually divide up the business market into segments based on size. Loans below $2 million are usually handled in a centralized fashion, in small business centers using credit scoring and are moving to the 1-800-BANK type of relationship. Companies with credit needs above $2 million and sales usually between $20 million and $200 million are handled by the middle market group, or corporate banking group. These bankers are strategically located in major business centers primarily on upper floors of office buildings and never at the local branch. These bankers specialize in working with manufacturers, wholesalers and importers, adding value with their experience, knowledge and understanding of business. Now it’s time to think about your banking relationship. Do you have a banker that is interested in your business? Does he or she understand your industry? Is he or she proactive with all of your business needs? If the answer to any of these questions is not a loud shout of support then it’s time to re-evaluate your banking relationship. Given the wave of bank mergers and acquisitions, it is probably a good idea to learn about alternatives anyway, long before it is necessary. The first way to find a competent, proactive banker is to ask for referrals from your accountant, suppliers, customers, or competitors. 75% of companies change banks based on referrals. When you are introduced to a prospective banker, ask questions. Interview the banker as much as the banker interviews you. What is his or her experience and background? What types of companies does your prospective banker have in his or her portfolio? Are they larger or smaller than your business? Does he or she have any experience in your industry? How are loans approved? What types of loans does the bank make? Ask for a number of references, call these companies and ask how your prospective banker has performed. With this information you can determine if you are talking to the right banker and bank. Remember that business banking is built on relationships. All of the products are virtually the same. The bells and whistles are almost universal. There are only so many ways to make a loan. The real differentiation is your relationship with a live thinking and breathing banker. Make sure it is the type of relationship you deserve. Barry Cohn is Regional Vice President for the San Fernando Valley Regional Office of Imperial Bank.