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Benefits of Building a Successful For an entrepreneur, a great business banking relationship can be the difference between a thriving business and one that never gets off the ground. It's like a marriage, in that both sides-the bank and the business-need to work at the partnership for it to successfully grow and thrive. Successful businesses follow three critical principles when they begin a banking relationship, according to John Prosia, executive vice president of Oak Brook, Ill.-based Leaders Bank, which specializes in serving private businesses and entrepreneurs. The first principle is never to take a business bank for granted. The second is to avoid promising the bank more than can be delivered. The final principle is to establish regular and honest communication with the bank. "If you spoke to a vast majority of our customers, they would universally tell you the same thing; having a good relationship makes a big difference in their company's financial health," Prosia says. The common key with all three critical factors is communication. "Leaders Bank customers are quick to realize the benefits of good communication," Prosia notes. "Most come from relationships with banks where they don't know who it is they're supposed to be talking to at the bank that month." Clients at Leaders experience virtually zero turnover. A banking study by the National Federation of Independent Business found that just half of the small businesses surveyed were served by the same account manager over a three-year period. Twenty percent were served by two managers, 13 percent had three, and a troubling 7 percent said they had no account manager at all. The success that comes from following the three principles for a business banking relationship has been illustrated in the partnership fostered between Leaders Bank and Litetronics International, a manufacturer of durable, high-efficiency lighting products founded in 1970, and headquartered in Chicago's south suburbs. Leaders provided Litetronics term financing for specialized equipment three years ago. Before partnering with Leaders, Litetronics dealt with a number of lenders unwilling to offer term financing. "Leaders operates the way banking should operate, the way it used to operate-which is you build a relationship," says Robert C. Sorensen, CEO of Litetronics. "A bank should be there in good times and also in bad times, trying to understand the customer's needs and business and working with them to accomplish objectives. That's exactly what Leaders does," Sorensen says. There are clear benefits for a business when a bank truly understands it. "Having an appreciation for Litetronics' management style and capabilities allowed us to be more patient when their timeline didn't happen exactly the way they expected," Prosia says. "We had faith in their ability to manage through that process." Since the start of the relationship, Litetronics' borrowing has doubled with Leaders, which now also provides a working capital line of credit. "Litetronics has been successful in their marketing plan and has enjoyed additional profitability. They are paying back those term loans not just as agreed, but early," notes Prosia. Sorensen says the banking partnership is right for both his company and the bank. "Leaders had to believe in us when things were difficult. We're very appreciative of the fact that they were willing to understand the business well enough to start the relationship in the first place." With the second principle of not over-promising, successful businesses are honest with themselves and their bank when it comes to their business prospects. "When Litetronics provides us with financial projections, they are conservative. They're not looking to hit a home run in the next at-bat. They want solid singles and doubles," Prosia says. Being realistic is important for both attaining goals and building trust. "That level of trust established between borrower and lender allows us to support customers when they need it most," Prosia adds. The third principle for a successful banking relationship is establishing regular and honest communication. "In many cases," Prosia says, "we develop relationships as close business associates, so we know about each other's respective families, lives and business activities." The frequency of fruitful conversations between bank and client varies, and may range from every few weeks for some businesses, or once every six months for others. The value is in the open lines of communication. "Each time we get together with Leaders, we learn more about each other and about the business," Sorensen says. A business bank relies on a high level of good, honest communication. "Litetronics actively communicates with us," Prosia says. "We have great communication, which is especially important when times aren't the best." According to Prosia, the bank should always try to find out what's important to a business owner both short- and long-term. "It's critical that a bank understands what drives a business owner and what the owner's goals are, which may include maximizing wealth, quality of life or industry reputation," Prosia says. "The best way for us to strengthen relationships is to ask that question all the time-‘what's important to you?'" On the flipside, Prosia says, "The best business owners are the ones who always look for best practices from their trusted advisors and other business owners. Questions we tend to get asked are, ‘Should I expand my business?' ‘Should I open up a new location?' ‘Should I go into this new market?' "We'll act as a sounding board and offer thoughts relative to what we've seen as others faced those same questions and encountered success or failure. The best business owners aren't afraid to ask questions." When businesses link up with a good business bank and follow the three principles for a prosperous relationship, they gain access to a partner who will understand their objectives, be flexible with solutions and contribute ideas that can help the business grow. |
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