Big Bank or Small...Does It Make a Difference?
All banks, large and small, offer value to their customers. I have worked in both large and small banks and enjoyed great relationships with customers in both settings. I have heard complaints on both but have also heard resounding praise for bankers of both large and small banks. My experience shows the real determinant of a satisfied banking customer is the relationship they have with their banker.
Choosing a Solopreneur-Friendly Bank
When choosing a bank you should determine which products and services you need and start by identifying banks that offer them. If you are a multi-state organization with workers that need to cash checks in other states or if you are need sophisticated cash management or treasury department services, a larger bank may be your best option. But for most solopreneurs, some good deposit accounts and assistance with small business loans is what they need most from a bank.
A solopreneur needs a “consultative” banker more than most businesses. Unlike larger businesses, a solopreneur doesn’t have partners or an officer group that can serve as advisors.
I once had a newly relocated solopreneur “interview” me for the position as his new banker. When he moved to a new town he looked to fill three key positions: doctor, lawyer and banker. He told me that he relies on these professionals to keep him healthy, keep him out of legal trouble and to help his business thrive. He wanted more than just a product or service. He wanted someone that would look out for his best interests and offer feedback and advice on how to improve his situation.
The Case for Consultative Banking
I am surprised at the number of calls and visits I get from other bank’s customers seeking credit because “their bank doesn’t do those” or “the only option is a home equity loan.” In most cases they are frustrated they have invested years in a relationship with an institution and when they finally need some help, they are disappointed with the bank’s response.
Their “banker” is often a customer service representative or teller that has little to no knowledge of small business lending. They re-direct customers to consumer loans or business credit cards because that is what they are incented to do.
Even if you get to a business banker, they usually know little about credit or loan underwriting because these banks use a “hunter and skinner” approach to lending. Under this model, the person that meets with you and gathers the application information sends it to someone else who underwrites the loan and make the loan decision.
Where's the Decision Maker?
The person making that decision may be “downtown” or even in a different state. Since you don’t meet with or speak to the decision maker, it is difficult for them to offer meaningful feedback or advice. They don’t know you or your business and will probably never walk into your office or place of business. They also don’t know your local community and can’t advise you on local factors that may impact your business.
As a result, it is difficult for either of these bankers to be consultative since each only knows half of the equation and therefore only has half the answers.
The benefit of a relationship with a community banker is that you are closer to the decision maker and the decision making process. Other banks’ customers are surprised to learn they can meet with someone knowledgeable on loans, that is interested in their business and who will underwrite, and in many cases, make the loan decision.
This closeness allows the banker to share information with the customer that can assist them with their loan request and with running their business.
Benefits of a Consultative Relationship
A consultative banking relationship can be invaluable to a solopreneur because it allows the customer to explain things that do not translate well onto paper, share information on the business that may be important to the credit decision, ask and answer questions and learn how financial statements can be used to manage the business. It also allows the business owner and banker to explore options and zero-in on solutions that fit their unique need.
Even if things don’t go well, a consultative banker can help the borrower understand why their loan application wasn’t successful and how to qualify the next time they seek credit. Community bankers get to know you and your business, know the market and market participants, often become customers and can even be a source of business referrals.
Don't Wait Until You Need Something
So if you are a solopreneur that doesn’t have a relationship with a banker or if you have been with a bank for years but haven’t explored their small business credit offerings, don’t wait until you need something to find out if they can help.
If your lengthy bank relationship turns out to be a one-sided affair that only benefits the bank, now is the time to make the switch and start working with someone who will take an interest in your business, offers valuable feedback and that lives, works and trades in your community.