By Patrick McCarthy
Oregon presently has 63 commercial banks doing business within its borders. Some banks are very large, some tiny, some have many locations, others do not. A number are headquartered in other states or even other countries. Should this matter to you and your business?
The banking industry continues to undergo consolidation. In 2001 there were more than 8,000 banks across the US compared to slightly more than 5,000 in 2013. Banks are changing their signage and officers with accelerating regularity. Finding the right bank and banker for the long term has become increasingly difficult.
As your business evolves, financial service needs usually change as well. In addition to lending needs, increased sophistication for cash management, online and mobile banking capabilities are often required. How does one select the right bank?
What do you want from your bank and banker? There is no right or wrong answer here, but one factor is clear; your values and needs will influence your method of bank selection.
Some individuals, place a high premium on the most favorable costs and terms, at the exclusion of many other factors. This approach, centered on “shopping” multiple banks for the best “deals” has its benefits, but you lose a key benefit when you select a bank using a quantified analysis or grid approach.
A relationship-driven emphasis will also seek competitive terms, but this approach places value on the interpersonal element as well as the bank profile.
As you consider your options, it’s crucial to take the steps below and ask the following questions:
• Who does your CPA, your lawyer, and anyone else in your industry refer?
• Meet a cross section of banks and bankers, a community bank, a regional bank and larger national bank — find out how they are different.
• Be prepared: Know your numbers, have your goals and plans available to discuss, share how your business is organized and understand that most closely held businesses will need the owners to provide personal guarantees for bank loans.
• Tell each banker your priorities and what is not working with the current banking arrangement.
• Is the institution and the banker experienced with your industry?
• Personal compatibility: Can you work with and trust this person?
• Will you be a big fish in a small pond? Or vise versa.
• What are the core competencies of the bank?
Many banks structure their lending teams for small business, business banking and corporate banking. Where you fit is often determined by annual revenue levels. The organizational structures of these lending teams vary and might impact your decision. Will your bank contact remain the same? How are bank decisions made? Do you need extensive international expertise? Who will be your key contacts? Is customer service a “1-800 number”? Will you be able to connect with other bankers in the institution? Do you care if you do or don’t see your banker periodically?
An astute businessperson will view the bank selection process on a comprehensive basis and view a banking arrangement as a long-term relationship. This approach should help you link up with a banking partner that can be a source of valuable advice and introductions. The mindset should be “can I be happy with this institution and individual banker for at least five years?”
To summarize, there is no singular approach to determine the right bank fit. By performing thorough research and evaluating your priorities, a clear banking partner choice will emerge.
Business is Brewing is written by B.I.N.G.
Members meet each second Wednesday in the Portland area.
Info at: bingoregon.wordpress.com
For information, e-mail Marcus Reed, firstname.lastname@example.org