Relationship Based Banking: How my Bank Became an Integral Part of my Business

Relationship Based Banking: How my Bank Became an Integral Part of my Business

For over three decades, I ran my own communications firm. My partner and I, and the entire firm, focused on great service and marketing expertise primarily to the manufacturing, retail and business-to-business areas.

To grow the business, with limited capital, I certainly called on the talents of my lawyer and accountant, but equally important was the relationship with my banker. It came to be that once every few months we would “break bread” together as I used him as a meaningful sounding board to test my business ideas relating to the firm’s growth and stability. The fact is, when the time was right to expand the business by adding staff – and determine the best ways to utilize that staff – he was key to our ultimate success. And the relationship lasted for more than two decades.

In his article entitled “Small Business: It’s All About Relationships,” which appeared in Investopedia, Dan Barufaldi writes that “The banker that an owner goes to for a loan should know the business owner, understand the history of the business and have an understanding of the owner’s judgement and credibility regarding the use and payback prospects for a loan.”

Allow me to share the pinnacle of my personal relationship with my banker.

Our business was “bursting at the seams” and needed more room. I was ready to buy a building with the trepidation of the affordability of such an endeavor. My banker willingly came with me on an inspection of our potential new office space before I made an offer. However, he also held the firm position that I must quickly lease a portion of the building to make the transaction work. After our tour, without me knowing it, he invited other colleagues from his bank to inspect the building. Within a few days, I received a phone call…”I found you a tenant.” “Who” I asked? 

His reply: “US!”

The truth was that location, in addition to becoming home for my communications firm, also became the bank’s home to train tellers and other banking staff functions for the next five-year period.

There are many other examples of this banker’s efforts on behalf of my business. He became an accounts receivables counselor of sorts, providing examples of best practices, and offered guidance on major capital purchases. And at holiday time, he was a fixture at our annual party.

The point of all this?  Small business firms often do not have the deep connections with experienced confidants to discuss various aspects of their current business and where they see their operation going in the future. Fortunately, for many years I did enjoy this valuable relationship thanks to the interest and courtesy of my banker.

In an article entitled “Assessing your small business banking relationship” by C. Daniel Baker that appeared in Black Enterprise, the author writes that “Your firm should seek a bank that rewards a relationship approach to doing business with them, and a banker who is able to give your firm the financial advice that it needs to survive and thrive in today’s ever changing economy.”

With the banking business continually going through changes…more branches, less branches, expansion into new services, a diverse delivery system…there appears to be a lack of personal continuity. Today that small business customer starts out with one bank contact only to bounce to someone new. This is disruptive and time consuming, and ultimately can lead to the disintegration of the relationship with that small business customer.

Small business owners truly seek a banker “friend.” Commercial banking, from this small businessman’s perspective, has been and always will be relationship based banking. It’s important to develop a commercial banking infrastructure that enables and encourages this personal service, and then let the marketplace know that you’re committed to this relationship model as well as to providing great, competitively-priced products. This should help to differentiate your institution among your competitors and lead to valuable, new business.

I feel that this approach is a good path to developing profitable, long-lasting relationships with small businesses. And even the key to getting invited to a lot of holiday parties.