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Five Questions Business Owners Should Ask Prospective Bankers

Five Questions Business Owners Should Ask Prospective Bankers


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by Mark Drennan
North Texas Market President


In the days following the first round of loan submissions for the Paycheck Protection Program (PPP), community banks were widely praised for their ability to guide customers through the confusing and often-changing application process nimbly. According to a recent survey of 441 small business owners by Greenwich Associates, a financial services data provider, 29% of the respondents will likely seek out a new banking relationship due, in part, to the service they received in association with the PPP loan process. The typical churn rate is 10%. These customers will likely transition to a community bank to serve their needs.

The PPP experience is not the only reason that small and mid-sized business owners are considering new banking relationships with small banks. The range of products and services, fees, convenience, and overall service quality are always important considerations.

Banks are leveraging technology to make it easier than ever for small and mid-sized businesses to transition from one institution to another. Still, the process of finding the right banking partner can be daunting, especially for time-strapped, multi-tasking business owners. To make the process a bit easier, Southside Bank offers the following list of the top five questions small business owners should ask prospective bankers to determine if the bank is a good fit.

1. What can I expect from my relationship with my banker? 

As with most businesses, successful banks are built on strong customer relationships forged by bankers, branch staff, loan officers, customer service representatives, executives, and other bank staff members. Community banks are primarily known for their ability to provide a high level of customer service. But what exactly does it mean to offer a high level of service, especially since different customers have different expectations of service?

Talking with a prospective banker about how they serve customers will establish expectations and help you determine if the banker and the bank is a good fit. Before meeting with a potential banker, think about the type of service you want and expect from a financial services partner. For instance, do you want to work with a banker who is more hands-off or who is exceptionally collaborative? Are you strapped for time and need the banker to come to your workplace for meetings? What is the banker’s typical response time, and is that reasonable to you? Will the banker provide you with a cell phone number, and will they respond on weekends or evenings? What options are available to you for customer support if the banker is not available or unable to answer your question?

Beyond service expectations, understanding the banker’s background and experience will also help you make an informed decision. Ask the banker about how long they have been with the bank. This will give some indication about how knowledgeable the banker is about the bank’s products and services that are the best fit for you, as well as the key bank staff and executives who can best answer your questions or address any future issues. Bankers who possess experience and an understanding of your industry are also preferable as they have probably encountered a wide range of industry challenges and are in an excellent position to guide you through them expertly. Bankers who are involved in the community also bring a great deal of value to business relationships, especially if they are willing to leverage their connections, as appropriate, on your behalf.

2. Is the bank familiar with my industry?

Bankers are most effective when they are familiar with their customer’s industries. These bankers are better able to guide customers through any financial complexities or issues that are specific to an industry such as healthcare, manufacturing, construction, or commercial real estate. You will get a better sense of the banker’s industry expertise, or about the bank’s overall experience in a particular industry, by asking prospective bankers about other companies they are currently working with and how long the bank has been working with similar businesses. The presence of products and services specifically tailored to particular firms also indicates the bank’s familiarity with the industry.

3. Does the bank offer a variety of services I need now and in the future?

Often, small and mid-sized business owners find new banking partners because their current bank does not offer the products or services needed for their businesses to grow, or because another bank offers lower fees. When meeting with a prospect banker, bring a list of the products and services you are currently using to compare it with the prospect’s offerings. Bankers should offer some suggestions about ways to bundle services that may lower costs, as well as offer options for increasing financial efficiency. Be ready to discuss any items on the list that you may not be using so that the banker can help you determine if there is a better option or if the items are not necessary.

Working with a banker with an eye toward your future needs is also essential. You can tell if the banker is knowledgeable about the latest small business financial tools and trends by talking about your growth trajectory and how the bank can serve you once you reach your initial financial goals. You might also ask about some recently launched products and services to get a sense of the bank’s commitment to innovation.

4. What is the lending process?

Even if you are not seeking a loan during the initial banker interview, knowing how a prospective bank handles its loans says a lot about its commitment to customer relationships. Be sure you understand how the bank usually starts its loan process. Is there a kick-off meeting? How will you be guided through the process, and who will be available to answer your questions? Our lending decisions made locally? What is an estimated timeframe for loan decisions?

One of the biggest complaints about the loan process is the perception of hidden costs or additional fees. If you are speaking with prospective bankers about loan services, be sure to ask about these at the beginning to eliminate closing surprises.

In addition to understanding the lending process, you will also want to talk with prospective bankers about how they can best address your business’ lending needs. This includes discussing the bank’s average size loans, the bank’s lending capacity, and the bank’s lending history to companies in the same or similar industries. You will also want to know of any loan program the bank offers, such as Small Business Administration (SBA) loans, to better understand the bank’s range of lending options for your business.

5. Is the bank prepared to meet your lending needs?

In addition to understanding the lending process, you will also want to talk with prospective bankers about how they can best address your business’ lending needs. This includes discussing the bank’s average size loans, the bank’s lending capacity, and the bank’s lending history to companies in the same or similar industries. You will also want to know of any loan program the bank offers, such as Small Business Administration (SBA) loans, to better understand the bank’s range of lending options for your business.

For more information about how Southside Bank can support your business, click here

 



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