The story of how one CEO was dumped by his bank and some expert advice on how it could have been avoided.
One CEO's story--and the banking experts' response
Talk to entrepreneurs about bankers, and you'll hear the same complaints again and again. Listen to William Adams, the chief executive of MIG Supply, a nine-year-old company in Columbus, Ind., that provides oxygen and oxygen-related equipment to nursing homes. For Adams, finding the right bank has proved to be an even tougher challenge than growing his business to $3.4 million in 1995 sales. Here are some of the classic complaints he had about one bank he tried to work with. (As this story went to press Adams reported that he was in discussions with another bank.)
He couldn't build a working relationship with his banker. "At first, the bank's representative was very attentive to us. Then the phone calls came less often," Adams recalls. "Whenever I tried to contact him, my call was transferred to someone else." He says turnover at the bank was also a problem. "Three times in less than two years, we had to educate a banker on the workings of our business."
His bankers wanted to support him only when times were good--and he and his bankers couldn't seem to communicate. When changes in state law caused MIG Supply's cash flow to suffer, "we tried to negotiate a refinancing," Adams says. After negotiations with bank representatives, he thought a new five-year agreement had been reached. However, he received unpleasant news through certified mail. "Instead of a confirmation of the five-year terms," he says, "we were being given official notification that our note was being called. No clear reason was ever given for why we were dumped."
Analysis: What the Experts Say
"Bankers are in business to make a profit" Douglas Fineberg Banking-industry consultant North Hampton, N.H.
"Bankers are in business to make a profit, just like you. That means you should think about them--and treat them--no differently than you would any other businessperson.
"Loan officers are, in essence, salespeople. You need to find out how much authority yours has to make a sale--meaning a loan--on his or her judgment alone. When you learn that--as well as what loan ceilings and other limits there are to your loan officer's authority--you can figure out something very important. You can figure out how and when to tailor your loan pitches for your loan officer's ears only, and when it's important to develop a very different financing pitch because higher-ups at the bank will be involved."
"Find a banker who cares about your industry"
Jeff Pfeffer Senior vice-president, Bank Leumi Trust Co., New York City
"Many business owners don't realize that cash is a commodity. They can often get it from any number of different bankers if they just look hard enough. What matters is the 'value added' that the banker brings to the relationship, along with cash. That means, among other things, the insights he or she can give into your industry's growth opportunities and how you can take advantage of them. Is your business plan working--and is it the best one, given the way your industry is changing? If your banker doesn't know or care enough to answer those questions, you're not dealing with the right bank.
"One great way to find a banker who cares about your industry is to look around the room when you go to a trade function. Odds are, you'll see some bankers. They're the ones who want to concentrate on your industry."