Learning to Live with (or Without) Your Banker

 

Laurie Snyder is pleased that her new bank, which is owned by a Japanese conglomerate, is putting her in contact with trading companies in Japan, where she is now doing some export business for her Inc. 500 children's clothing company, Flap Happy, in Santa Monica, Calif. Snyder shopped around at 10 banks and settled on her current one because "they're always asking me what more they can do for me."

Entrepreneurs cite many other ways in which banks are meeting their needs today. For example, some bankers offer lessons in on-line banking or reading financial statements. Others invite clients and prospective clients to educational seminars and community events. Still others serve as an informal board of directors for their small-business clients. "In the past it was never an open relationship. Banks were in the driver's seat," says Steve Simon, a commercial-banking vice-president at Firstar Bank in Des Moines. "That's all changed now."

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4. How Do You Know When It's Time to Leave?
If your banker isn't providing you with a good number of the services mentioned in the previous section, it's probably time for you to leave or at least to shop around. Like most company owners, Daniel Meloro was reluctant to make a move from his bank of 35 years, but after hearing from colleagues about sophisticated cash-management features, he recently decided to rethink the relationship his $35-million food-ingredient-manufacturing business had with its banker. "People think of their banker like their family doctor; they never dream to question him or her unless there's a huge problem," says Meloro. He describes the search process as "a pain, and something I wouldn't relish doing again." Yet, in the long run, he feels that his company, Farbest-Tallman Foods Corp., in Montvale, N.J., will be better off for it. Thanks to his investigating, Meloro now knows to ask for options like automatic sweeps, on-line banking, interest-rate caps, and interest rates pegged to a less volatile international London-based rate (versus the Fed's rate). Meloro learns more from each banker he visits, playing banks' offerings off one another, and says, "It's an open field out there."

Service is one reason to switch banks. Another is that the premiums of staying with a bank, of building a long-term relationship, are vanishing in today's volatile marketplace. A bank might want your business one day and then change its mind the next. That happened to Donald Boyken twice. "Two years ago the bank we'd been with for 13 years said we were too small. We switched again in September for the same reason," says the CEO of Boyken & Associates, a construction consulting firm in Atlanta.

The TEC survey responses suggest that entrepreneurs are beginning to realize that being a long-term customer doesn't count for much with banks today: nearly half of the respondents have switched banks in the past five years, 11% in the past year alone. Jim Houghtaling, CEO of the Holt Group, an advertising firm in Greensboro, N.C., switched banks in the past year because "after 25 years as a loyal customer, I had to jump through too many hoops to get a line of credit. Quite frankly, it was embarrassing, and I resented the treatment." Jon Cunningham, CEO of C.A. Cunningham Co., a manufacturers' rep and distribution company in Charlestown, Mass., was flabbergasted when his bank asked him for a personal guarantee after the company had banked there for 25 years and had never been late on a payment. David Daly dropped his Seattle funeral home's bank of 75 years because it changed loan officers on him every 12 to 18 months. "We're an unusual business," says Daly, "and we're tired of having to continually indoctrinate new staff on the major line items of our balance sheet."

Given the volatility and fickleness of today's banking climate, it's best to decide that you don't want to do business with your bank before your bank decides that it doesn't want to do business with you. Check out the benefits your bank's competitors are offering, beware of bank mergers (a giant headache for many company owners), and by all means stay on top of your bank's fiscal health. Chastened by a rampant savings-and-loan crisis in his state, Dallas regional Entrepreneur of the Year winner Gary Salomon of American Fastsigns has made a habit of monitoring the financial performance of his banks. It has paid off for him: the CEO got out of his former bank four months before it went belly-up. Business-insurance broker Fred Armstrong wasn't so lucky: last year he opened up his morning paper to find that one of his own banks was under a cease-and-desist order even though it continues to show an operating profit. Now he tracks the performance of his banks with two bank-rating services and switches whenever his banks fail to get high marks.

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