|
Judy Ballast, Vice-President of Business
Banking at Capital One, recently shared the wisdom and insight she's gained
as a specialist in small and mid-size businesses and their banking needs.
This week, how to choose a banker and get the most from the
banking relationship.
(And if you missed Part 1: the seven biggest banking
mistakes small wellness businesses can make, plus three kinds of clients
that give bankers nightmares.
Read
Part 1.)
WHAT SHOULD SMALL
BUSINESSES LOOK FOR IN A BANKER?
Judy Ballast, Vice-President of Business
Banking at Capital One, says that business owners should look for a banker
that "They feel confident in, who can deliver what they say they will."
Since that's easier said than done, we
asked Judy specifically what business owners should look for.
1) Does the
prospective banker have a solid work history?
Seek out a banker who's spent most of
his or her career with a handful of institutions. Avoid bankers who have
hopscotched from bank to bank. That kind of work history suggests that they
haven't stuck around long enough to build knowledge from working with
clients through the business life cycle. And, they'll be less familiar with
internal bank processes and resources than someone who knows the
organization well. Plus, you want to build a relationship with someone
who'll be around for awhile.
Questions to ask:
How long have you been in commercial banking? Which banks have you been
with? How long have you been with this bank?
2) Does this banker
have deep experience in all aspects of small business banking?
According to Judy, "Some bankers can be
'one and done' transaction specialists". For example, a banker may
specialize in nothing but large dollar commercial lending, asset-based
lending or SBA financing.
While those specialists can be helpful
resources, business owners are better off building a primary banking
relationship with a generalist who can "plug in" specialists as needed and
orchestrate their efforts. Otherwise, the client has to identify and select
the most appropriate and best-qualified specialists and coordinate their
efforts with other banking resources -- something that most business owners
really don't have the time or expertise to do well.
3) Does your
personality mesh well with this banker?
You need to be able to relate well to
your banker on a personal level. You don't have to golf together, but since
you're going to be sharing intimate details about your business, make sure
you feel comfortable with the banker you choose.
Avoid bankers who seem rushed,
impatient, intimidating or perpetually pessimistic. Look for someone
who'll make sure you understand options and tradeoffs and the pros and cons
of different choices.
This one's especially important. We've
worked with many successful wellness businesses who were initially dismissed
by bankers, attorneys, and other professionals who simply lacked
imagination. Anyone can poke holes in your business plan. Look for a
banker who can propose solutions for those "holes".
4) Can you detect a
genuine interest in clients and their businesses?
The ideal business banker has a genuine
curiosity about their clients' businesses. In fact, that's why Judy herself
chose banking as a career: "I like to solve problems and fix things, and I
really like understanding client businesses."
If you're considering a banker who
talks more about the bank and its financial products than about your current
business challenges and plans for growth, run for the hills. This isn't the
banker you want.
Questions to ask:
How often do you proactively call clients during the year, just to check
in? How recently did you visit a client business and why? Can you tell me
about a client success that you felt especially good about?
5) Is your
prospective banker well-connected?
As Judy says, "it's the banker, not the
bank" that business owners deal with day in and day out. A top-notch
commercial banker will have a network of business resources that they can
help you tap into.
Say you're looking for a new wellness
center location. Your banker can suggest a commercial real estate broker
that other clients have used successfully. Perhaps you're thinking about
selling your father/son healthcare practice. A well-connected banker can
suggest a business valuation expert and an attorney with experience in
exactly that area.
Questions to ask:
I may need a new accountant...who would you suggest? If I need a new
commercial attorney, who have you seen clients work well with?
WHAT SHOULD SMALL
BUSINESSES LOOK FOR IN A BANK?
1) Do you want a
single bank to handle your personal and business accounts?
While a dedicated banker and financial
planning services may be appropriate for high net worth business owners,
even a new business owner may find it valuable to consolidate personal and
business banking relationships.
Having one banker to call who can assist
with business and personal needs frees up the business owners time to focus
on business. Your banker can be your research and financial solution
partner for both business and personal needs. And you may be able to take
advantage of online banking tools that give you a consolidated view of your
business and personal banking relationships.
Even a sole proprietor like a personal
trainer or nutritionist can benefit from combining personal and business
banking relationships with a single banker. Since you're often relying on
personal guarantees and personal assets to supplement the financial
resources of your single-person business, a banker who understands your
complete financial picture is an asset.
2) Choose a bank that
will be convenient for your needs.
Find out if the banker will come to your
office. Consider whether bank locations are convenient for your needs. For
example, if you'll be making night deposits, make sure that the nearest drop
is on a convenient route. More and more banks have extended their hours to
include evenings, Saturdays, and Sundays. If this flexibility is important
to you, look for that feature.
Convenience can be especially important
if your wellness business maintains extended hours which make it difficult
for you to get to distant locations during the typical business day.
3) Does the bank have
the resources my business needs?
Most businesses will need to borrow
money at some point. Find out whether this bank has a strong track record
of lending to your kind of business. Lending services, pricing and
underwriting guidelines can vary dramatically from bank to bank.
Most banks offer lending for operating
lines of credit, equipment loans or leasing, business expansion or real
estate. However, expertise and flexibility will vary greatly from bank to
bank. Asset-based lending and factoring frequently require a financing
source other than a bank so your banker needs to know the best resources for
your industry.
You'll also need to consider whether
they offer tools and products that can make your business life easier and
increase your staff productivity.
For example, a lockbox (where payments
are sent and posted) and sweep accounts (which automatically transfer
available cash to an interest-earning account) can streamline your in-house
operations and reduce the likelihood of fraud
Tools like online banking offer
streamlined bill payment and instant visibility to account activity and
balances. You may also want consolidated reporting of multiple accounts --
either personal and business, or multiple business accounts. This feature
is especially valuable if you oversee multiple businesses or organizations.
Also: does the bank offer security
features that enable you to safely delegate certain banking responsibilities
to others in your organization?
4) If your business
is new, are the minimum banking fees and charges reasonable?
Check the cost and minimum balance
requirements for a "starter" business account. These accounts are often
free at entrepreneur-friendly banks and minimum balance requirements can be
as low as zero.
Investigate the per-item costs for
business checking as well. For example, will your business pay a fee for
each item deposited?
If you're planning to use your bank's
merchant services for credit card processing, check the fees to make sure
they're competitive.
5) Does this bank
have a full range of products that your business can "grow into"?
As a business owner, your goal is to
choose a bank that can provide additional products, services and resources
are your business grows. Otherwise, you'll have the unpleasant task of
switching banks or maintaining multiple relationships -- not what you and
your staff should spent time on.
Examples:
credit-card processing and merchant services, payroll services, and "bank at
work" benefits for your employees.
GETTING THE MOST OUT
OF YOUR BANKING RELATIONSHIP
We also asked Judy to tell us what
clients can do to benefit most from their banking relationships. Her
advice:
1) Know your cash
flow and what's going on financially in your business.
Judy says a savvy business owner should
never say "I run 'X' dollars through your bank every year so you should know
by looking at my account how I'm doing." You're the owner. It's your
responsibility to know your cash flow situation and key financial trends in
your business. If you need help in financial management, a resourceful
banker can suggest a business advisor who can help you straighten things
out.
2) Use bank resources
fully.
Some clients are still reluctant to use
services like online banking. However, if you always call to check your
balance or the status of a deposit, you're often going to spend time on hold
or have to leave a message and wait for a callback.
It's usually much quicker and easier to
check online yourself. And services like online banking are usually
included at no additional charge, so take full advantage of them.
Business credit and debit cards assist
owners and employees in managing business expenses. Some banks offer
business debit cards with daily pre-set spending limits so that your
employees can have a predetermined amount available for business purchases
they make routinely.
3) Keep your banker
in the loop.
Treat your banker as part of your
extended team -- someone that you trust and have confidence in. Include
them in your medium-term business planning and thinking. They can help you
anticipate issues and point you to potential resources.
The business climate and the economy can
change fairly quickly so while some short-term planning (the next 6 to 18
months) is important, medium-term planning (18 months to 3 or 4 years) is
vital to business success. Successful business owners anticipate changes in
trends and consumer or business spending and will adapt their business model
accordingly.
4) Use your banker's
Rolodex.
A good business banker is extremely
well-connected to other business resources, like CPAs, attorneys, real
estate agents and brokers, valuation experts, business coaches, and more.
Keep them informed about your business
goals and challenges and ask them for suggestions about professional
business resources that may be able to help you.
Got banking questions for Judy? E-mail her
at
judy.ballast@capitalonebank.com and she'll be happy to chat with you.
|
