A good relationship with a bank can pay dividends
By Robyn A. Friedman • Bankrate.com

Jackie Harrison worked hard to ensure that her business maintains a good relationship with its bank. She's glad she did.

"Things come up at various times, and you want to be able to immediately contact somebody when you have a need," says Harrison, executive director of the Center for Humanistic Change, a nonprofit organization based in Stanhope, N.J., that provides residential and vocational services for developmentally disabled adults.

She banks with Valley National Bank based in Wayne, N.J. "I have 200 staff and a set payroll," Harrison says. "The money comes from the state, but if something is delayed or the legislature holds up the money, I have a line of credit with Valley, which means my business keeps going and people get paid."

Benefits of a good relationship
A strong relationship with a financial institution can mean the difference between success and failure for small businesses that need capital to expand or seize on new opportunities. But it can mean much more:

• Better loan terms -- Businesses with strong ties to a bank are in a better position to negotiate terms such as interest rates and points. "The more relationship that you have with the bank, the more call you have on that bank for better rates or services," says Jim Pope, president of Atlantic States Bank based in Norcross, Ga.
• Quicker approvals -- "If the banker is very familiar with you and your needs, and understands why you need the financing, you don't have to go through as much paperwork," says Jackie Baer Cowdery, senior vice president of KeyBank headquartered in Cleveland, Ohio. "It will save you time."
• More credibility -- "One of the hardest things for small businesses is when they come up with a new idea or they want to expand their business," says Peter John Southway, executive vice president of Valley National Bank. "If they have credibility with their banker, they can work with their banker to make that idea come to fruition. If they don't have that credibility -- that relationship -- somebody is going to be more reluctant to step up to the plate and help them fund the project at hand."
• Breaks on service fees -- While check-printing charges or bad-check fees are a fact of life, established bank clients can probably get a break on items such as account maintenance. "Monthly fees, in my opinion, are negotiable," says Martin Zients, senior business analyst at the Small Business Development Center, a unit of the College of Business at Florida Atlantic University in Boca Raton, Fla.

Things to do
So what can a small business owner do to establish the best relationship possible with his or her banker?

• Choose the right bank -- Not every bank is committed to establishing relationships with small businesses; some prefer to deal with large corporate clients or individuals. "There's a lot of banks out there," Zients says. "Business people always flock to the one on the corner, but that may not be the right bank." With the right bank, he adds, the door is always open because business persons have somebody to go to rather than just being a number.
• Establish a personal rapport with a bank officer by meeting him or her in person on a regular basis -- "Freely meet with the people you're dealing with at the bank," says Ken Nickel, senior vice president at Valley National Bank. "There are those people who just want to deal over the phone, and that's OK. We'll do that, too, but we will never have the relationship with those that we have with the people we physically meet with."
• Keep the lines of communication open -- Business owners should keep the bank up to date on both good news and bad. "The bank really wants to be told everything about your business," Cowdery says. "Just as you want to be able to trust the bank, we want to be able to trust you." So if a problem develops -- a loss of a major client or accounts receivable become delinquent -- a business owner should inform the bank promptly. "The most difficult thing for bankers to deal with are surprises," adds Tom Wilson, president of Tampa, Fla.-based Southern Commerce Bank.
• Stay loyal to the bank by placing personal accounts and business accounts at the same bank. "To the extent that the small business owner can find a bank which they're comfortable with and appreciates them -- the more they can do with them, the bigger the relationship can grow and the more they can call on that bank when they have a need," Pope says.
• Think of the bank as a partner, not a vendor looking to sell products or services -- "People don't do a good job of tapping into the knowledge base that the bank can provide them," Cowdery says. "There's that leeriness of not wanting to be heavily marketed to. We're not here trying to make a sales pitch. We do not want to focus on transactions; we want to focus on long-term relationships."

By establishing a good relationship with its bank, a small business creates a level of trust that will reap them benefits for years to come.

"Where we have been successful and have developed a long-term relationship, the customer understands that when they need the banker, we're going to be there for them," Wilson says. "You just can't go down the street and start over. It takes time to build that, and it's worth protecting."

Robyn A. Friedman is a freelance writer based in Florida

-- Posted: Sept. 23, 1999