Building relationships


I live at sea level but only two hours from Mt. Rainier. We had a very late summer this year, some would say we missed it altogether in the Northwest.

But Friday was a summer day. Warm but breezy. Lots of sun. And late August is a great time to visit Mt. Rainier as the wildflowers pop in profusion.

Right? Not quite.

A late summer at sea level, it turns out, means a late summer on the mountain. The wild flowers are not out yet. And on the Skyline Trail, you cannot even get past Myrtle Falls without traversing some snow.

Don't assume...

If you were to go to the Rainier National Park website to check on trail conditions before heading up to the mountain with athletic shoes instead of climbing boots, and without your climbing poles -- I can't imagine who would do that -- here is what you'd find:

August 17, 2011: Mt. Rainier received a heavy amount of spring snow this year creating hazardous conditions in the backcountry. Subsequently we expect a very late melt-out this summer. Issues to consider are route-finding, creek and river crossings and trail damage. Good navigation skills are needed in these conditions. It is easy to get disoriented and/or lost. There are also steep, icy slopes in numerous locations around the park. Always check with Park Rangers for trail conditions before heading out into the backcountry.

Rather than the anticipated 3 hour hike, with a 1,700 foot elevation gain, we headed up one way, turned back due to snow, tried another, turned back. It was still breathtaking but not what we expected.

And if we plan to see the wildflowers, we need to head back up in a few weeks. I'll check online to see if they have popped before I drive the two hours each way to see them!

Lenders: What assumptions are you making about your borrowers?

About how their business is doing because:

  • it is 'Back-to-School' season
  • the recession is over
  • your other borrower's business is improving

Directors: What assumptions are you making about your financial institution?

About how you are doing because:

  • management is upbeat
  • the recession is over
  • the other directors don't seem as concerned

Check your assumptions by checking in...

For lenders and business bankers, not only is it a great time to visit business borrowers to be sure you have a good sense of how business is going, but it is essential because other business bankers looking to increase market share or re-balance their loan portfolio might just get there first.

And if you are a director? Never stop asking those substantive questions to continue monitoring the health of your financial institution.

What is good enough?

One last thought. Just because conditions are less than what you expect doesn't mean they are not good enough. We had a fantastic day. Be open to what you'll find when you ask the questions you should ask. And then make a fresh assessment of the situation.

In his latest post to the AllBusiness.com Main Street Financing Challenges Blog, Sam Thacker reminds business owners about alternatives to bank lending.

Sam is a buddy of mine from Austin TX who is currently a partner in the Austin Texas based financial consulting firm, Business Finance Solutions which assists small businesses with financing challenges.

Why do you need to know about non-bank lending?

If you are a bank or credit union lender, you need to know the alternatives available to your customer/members. And heck, if you can't make the loan they need right now perhaps you ought to be recommending, temporarily, a non-bank financing alternative.

Often they are more costly so the business will have an incentive to come on back, especially if you solved their problem even when you could not make the loan.

Read Sam's full post here:

Alternative Lending Sources Are Loaning Money


What alternative sources have your business borrowers been using when you have to say no?


According to CFO magazine citing a survey by Greenwich Associates, 'an historically high number of small and midsize companies have put their banking business out for bid.'

19% of midsize companies and 16% of small businesses indicated plans to do so in 2011. Greenwich asserts than in a typical year, only about 10% of companies switch banks.


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Why are they switching?

The top driver for small business was the current level of customer service. Also cited were a desire to reduce banking fees and access to new sources of capital. And related to the economic challenges and the credit crisis, in some cases the companies' needs are just not aligned with the capabilities of their banks.

What is a banker to do?

  • Don't assume your banking clients who have stuck with you thus far plan to do so. You may be the last to know.
  • Prioritize your current clients, get in touch with the keepers and stay in touch
  • Prioritize your prospects, get in touch with those you want and stay in touch

What are you doing?

What are you and your business development and business lending colleagues doing to connect or reconnect with business borrowers?

  • Calls or visits?
  • Resources such as business seminars to help them be successful?
  • Referrals to their business of potential customers or advisors?
Or something else altogether?
One of the interesting things about the internet is that whatever is written stays out there for a very long time...forever? This morning I ran across an Inc. Magazine Online article from 1996 suggesting that small businesses should be shopping around if their bank does not meet some criteria.

And as is often the case, the word 'bank' could be replaced with 'credit union' if you are offering member business lending.

A Borrower's Market for Small Business

Before I share it with you, let me suggest that at least for small businesses who are in a strong credit position, it is definitely a borrower's market...again. So here is your borrower's checklist:

  • Does my financial institution see me through adversity?
  • Does it save me time?
  • Does it treat me as an individual?
  • Does it teach and advise?
  • Does it do something special for me?
  • Does it accept responsibility for me?
  • Does it let me borrow against the future?
  • Does it find customers for me?

Back to the Future?

I am not suggesting that we are in the same boat now as we were in 1996. But cycles are cycles. Is your bank or credit union positioned to come out on top when the borrower's start asking these questions again? Read the entire article for specific stories that illustrate each of the points.


What are you doing to increase your competitive edge?

Okay, you probably won't answer that here because your competitors read this blog, too. But think about it!

As a lender, you have three questions to answer before you can say 'Yes' to their loan request:

  1. Would the borrower pay the loan if they possibly could?
  2. Does it look like they can pay it from operating income?
  3. What is the back-up plan in case they can't?
However, the answers to numbers 2 and 3 are not even relevant if you can't get the right answer to the first question. What you are trying to determine with the first question is:
  • Could you do this deal on a handshake?
  • Is their word their bond?
  • Do they keep their promises?
The most important decision the lender will make about the business owner is whether you can trust them.

Yes, this is subjective and you won't find the answer specifically in any of the documents provided.You will find it by how the owner says what they say to you and your interpretation of the documents they provide.

Tax Returns

  • Do they report all their income or do they confide in you, the lender, that they do some of their work under the table'?
  • Does the company pay for the owner's personal cars and travel?
  • Does the owner resist providing the tax returns and schedules you request?

Conversation

  • Does the owner brag about deals that might sound underhanded (even if they aren't) without providing the full context?
  • Does the owner come across as someone who is ruthless in business (in a bad way)?

Follow-Through

  • Does the owner provide the interim financial information they agreed to on time?
  • Or does the lender have to keep hounding the owner for information she promised to send?

Impressions count

Everything the business representative does, everything he says, and everything the company provides to the lender should be run through this 'Character' filter. If the business and the business owner do not pass this test, their ability to pay and the strength of their collateral and personal net worth will be irrelevant.

Get to 'yes' with the first and most important question. Then move on to questions 2 and 3.
This information might be a good insert for your next business borrower email or newsletter.


Did you know that 40 to 60 percent of small businesses never reopen their doors following a disaster?

According to the 2009 Disaster Recovery & Business Continuity Survey from Charlotte, N.C.-based Agility:

Ninety percent of smaller companies (less than 100 employees) surveyed spend less than one day per month preparing and maintaining their continuity plans.

One in five (22 percent) spend no time maintaining their plans.

Comparatively, 20 percent of larger companies (more than 100 employees) spend over 10 days per month on their continuity plans.

The Small Business Administration (SBA) is partnering with Agility Recovery Solutions to launch Prepare My Business, an online educational portal which provides small business owners access to a variety of tools and solutions to strengthen their firms' resilience when faced with unforeseen interruptions -- whether man-made or natural disasters.

Take a look and consider including the link to this site in your next business borrower-focused email or newsletter.


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My new keynote and workshop, P.L.A.N. to Capsize, focuses on planning for setbacks and quick recovery. Send me an email

  • for a complimentary copy of my 'Ten Essentials for Success' 12-page workbook which includes personal, team and organizational planning for setbacks and testing your assumptions.
  • to talk about bringing me in to do this program for
    • your senior management  as a facilitated session
    • your business clients as a value-add
    • a non-profit organization your financial institution supports
    • your professional association's next conference

I often find the ideas CPAs are sharing about maintaining client relationships are right on target for what business bankers need to be doing.

So here is a quick list of six ways to lose your customer and the CPA alternative for keeping their clients from AICPA's CPA2Biz ezine. Read the article here.

1. Lose: Do the minimum OR
    Win:   Go the extra mile on the current engagement. CPA examples:
  • Conducting extra analysis using business-intelligence tools like BizBench.
  • Bring the project in earlier than promised.
  • Or hand-deliver reports and discuss in person.
2. Lose: Don't call, don't write, don't visit OR
    Win:   Spend more time with the client. (see related story.) CPA examples:
  • Visit at every opportunity.
  • Schedule business meetings near mealtimes to grab some extra quality time over a nice meal.
  • Invite the client into the firm's office.
3. Lose: Consider each customer in isolation OR
    Win:   Build the business relationship. CPA examples:
  • Help the client network with your other clients.
  • Offer free seminars for the client's staff.
  • Refer new business to the client.
4. Lose: Business is business OR
    Win:   Make it personal. CPA examples:
  • Understand their goals in life and business.
  • Get hard-to-find tickets to big games or shows.
  • Remember birthdays and anniversaries.
5. Lose: Don't do your homework OR
    Win:   Learn more about the client's industry. CPA examples:
  • Read the same trade journals they do.
  • Learn all you can about their competitors.
  • Join them at trade shows.
6. Lose: Be satisfied with a surface knowledge of the company OR
    Win:   Increase your knowledge of the client's company. CPA examples:
  • Spend time with the junior managers.
  • Understand the company's power structure.
  • Meet the boss.
Certainly the depth and type of relationship building a CPA engages may differ somewhat from their business banker, but maybe less than you might think.

And as they point out in the CPA-focused article, if you are not paying attention to your clients you can bet your competition is.

What are you doing to lose (or to keep) your borrower's business?


The U.S. Small Business Administration has announced the SBA's Patriot Express Pilot Loan Initiative for veterans and members of the military community wanting to establish or expand small businesses. 


Eligible military community members include:

 

  • Veterans
  • Service-disabled veterans
  • Active-duty service members eligible for the military's Transition Assistance Program
  • Reservists and National Guard members
  • Current spouses of any of the above
  • The widowed spouse of a service member or veteran who died during service or of a service-connected disability
  • The SBA and its resource partners are focusing additional efforts on counseling and training to augment this loan initiative. 


Start with a Self Assessment

Here is their message to veterans:

You've got an idea for a business. Now it's time to evaluate if your dream of starting a business can be a reality. The Checklist for Starting a Business is a comprehensive tool designed to prepare you for self employment by analyzing your responses in key areas and providing a menu of supporting resources.


To learn more about the Patriot Express Initiative:

 

Patriot Express Loan Initiative

Resources to Help You Start, Grow and Succeed

Assisting Small Business Owners

Press Kit

Patriot Express Forms
Aldonna Ambler is a growth strategist and a friend of mine. She has a background in venture capital and in starting and growing multiple businesses. She works with community banks among other client niches. She has personally advised U.S. Presidents on Small Business Needs.

Are you competing for the remaining strong business borrowers? All the business lenders I talk to are!

In this post on Pegging, Aldonna shares a marketing strategy that sounds like it is about Catholic Single Moms and Grandfathers, until you read Step 9.

Read it here.

Here is a business resource for you. Use it:
  • to understand business growth strategies better so you can
    • have more helpful conversations with business borrowers
    • better assess their growth strategies...will their plan work?
    • strengthen your relationship
  • as a good excuse to connect with your current borrowers. This is a resource that may help them.

SBA Strategies for Growth website Dell and the SBA have partnered on a site called "Strategies for Growth". I spotted it because the Journal of Accountancy recommended it to the CPAs in private practice for the same reason I am suggesting it to you...a good resource for clients.

Here is the link to the overall site: SBA | Strategies for Growth

And here are some of the topics covered:

Preparing for Growth Image

reparing for Growth
Expanding your business
requires planning...

Federal Contracting Image

ederal Contracting
Sell to the government
to grow your company...

       

Team Building Image

eam Building
Working together
helps growth happen
...

Exporting Opportunities Image

xporting Opportunities
Expand your market
overseas... 
       

Technology and Growth Image

echnology and Growth
The right tools help your 
business grow.
..

Disaster Recovery Image

isaster Recovery
After a disaster, coming back,
growing stronger...
       

Marketing Image

arketing
Research, promotion, ads,
sales, feedback and more...

Profiles of Success Image

rofiles of Success
They grew their businesses,
you can too...