Because of consolidation, banks have become huge and impersonal. There are still smaller banks around that are community-oriented, but they’re not as common as they were several years ago.
Brendan Greeley in Bloomberg Businessweek says that rural banks have advantages that big banks don’t, which seems counter-intuitive because there aren’t as many resources, and the risks can seem greater.
But if a business needs a loan, it helps knowing the banker, and sometimes it’s easier at those local banks that Greeley writes about. Especially if the business is locally based and has local customers, having a personal relationship with a banker can be beneficial because he or she will look beyond the numbers to determine if the business is viable in the local economy.
A banker who’s familiar with a company’s issues will also answer questions more honestly and thoroughly, and will probably provide useful information that’s not widely known. What might seem like a strict requirement could be loosened to fit the needs of someone the banker knows well, which makes the loan process easier.
There’s also something to be said for extra effort. There’s a lot of paperwork that has to be done correctly and thoroughly. If the banker knows the client better, he or she will pay more attention to what was completed and which documents were provided. And if there are more provided than what was asked for, that effort will be noted, which will help secure the loan.
Reputation is also important. If the numbers aren’t completely shiny or extraordinarily impressive, at least the banker will be able to find out what the company’s customers think. If a company has a great reputation, has demonstrated positive cash flow, and has paid its vendors on time and has treated everyone well, the banker will take such non-quantitative information into consideration.
Of course, it’s important to be responsible and also offer a solid plan for true success, but a savvy banker will already know how to determine that. The added value comes when the banker and borrower really have a relationship that transcends the guidelines and stats.
