A Friendly Banker

Cultivating close ties with your local lender can pay off for your business

Larry Cain had a great relationship with his banker. Six years ago the banker helped Cain secure a loan to start a direct-mail marketing business. So when the banker moved to another local bank, Cain followed. He "would return my calls promptly and tell me how I needed to structure financing -- and he would give us a good level of service," says Cain, whose two Winchester (Va.) companies -- Mountaineer Raceway and Val-Pak -- together have 10 employees and $1.2 million a year in sales.

But early this year, Cain's banker left for a mortgage company. Cain's request for a $1 million loan to consolidate his debt was left hanging for five months, with nary a word from the new banker. Frustrated, Cain recently closed his two personal checking accounts and is looking for a new bank.

He should. A good banker can be a huge asset for your business, speeding loan approvals and offering advice that can save you money. Yet finding the right match means doing some legwork. You'll want a bank that offers the services you're likely to need -- revolving credit, working capital loans, vehicle leasing, commercial real estate, and Small Business Administration loans -- as well as low minimum account balances.

The most important thing is finding a banker committed to your business. Mike Hager, associate deputy administrator at the Small Business Administration in Washington, compares it to finding a good doctor. "I want a doctor I'm comfortable with, who communicates well, and seeks solutions to my issues," he says.

No one knows customer service better than customers, so begin your search by asking your peers in trade associations or local business groups about their experiences. Once you've found two or three candidates, set up appointments with each. Move on fast "if you're bounced around, if no one knows who's in charge of small business, or if they put you on hold," says Tom Nist, senior vice-president of PNC Bank. When meeting potential bankers for the first time, your passion for your business may matter more than your financials. "Be prepared to tell your story," says Nist.

At that first meeting, ask about fees, and about who approves loans and how long the process typically takes. Smaller banks don't always offer services such as financial-statement analysis or assistance expanding overseas, says James Ballentine, director of grassroots and community outreach at the American Bankers Assn., a trade group in Washington. And Ballentine says many regional banks don't give loans above $1 million.

Find out if you'll have a specific banker assigned to you, or if, as at many larger banks, you'll have a principal contact who will channel you to other departments. Some services may even be automated. Nist says PNC has largely automated its underwriting of loans up to $100,000. That could lead to faster approvals, and you can still talk to a banker if your loan is declined or you want more advice.

Keep in mind that even a productive partnership needs a commitment from both parties to last. "The best way for a small business to build and maintain a good relationship with a bank is through frequent conversations," says Nist. Build trust by paying back loans on time, hitting your financial targets, and alerting your banker to any problems early. A good banker, after all, may be able to solve them.

By Ellen Hoffman

    Before it's here, it's on the Bloomberg Terminal.