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Find a banker you can bank on.

By John Hamilton

[March 31, 2010]

A bank relationship that has stood the test of these past five years is a rarity, given changes in the banking profession and difficult market conditions for banks and small business alike. Is yours one of those businesses that have been forced to re-think its bank relationship? Or are you proactively deciding whether and how you might go about the process of switching? If so, here are five suggestions:

1. Treat the bank as a relationship, not a commodity to be priced. If you are shopping simply because the bank down the street is offering a rate that is a half-point better, don’t! Relationships are two-way streets, and your loyalty will count for something when you most need it. Also, don’t think that all banks essentially are the same. As an investor, we see great variability in bank terms and levels of support that go beyond the pricing on the loans they offer.

2. Determine the economic health of your bank. If a bank is not strong, it may be forced to shed customers or move them into “workout” even when it is not rational to do so. Research the bank’s financial condition. One option is The, which offers a consolidated graph using FDIC factors like liquidity, profitability, etc. Click here to compare ratings, but before you panic, realize that many banks’ ratings are depressed in today’s market.

3. Research to understand the banks’ focus in the commercial market. Know whether your business is in its “sweet spot” or on the edge of its market. You don’t want to fall off your bank’s radar based on too much – or not enough–growth. Banks that lose interest in serving your market segment tend to be the most inflexible.

4. Understand who will make decisions on loans. Some banks separate the credit analyst from the sales broker, while others integrate these functions. Some banks make credit decisions at the regional level; others do it locally. Which is best for your business?

5. Look at the banker, not just the bank. Qualities to look for in a banker include someone with whom you can make a personal connection, who is trained in the banking profession, who will take the time to understand your business and be your advocate within the bank, and who has credibility with the bank’s decision makers. Call a retired banker: They know who it was hardest to steal customers from. Or call an investor: They see a high volume of deals and can suggest how to start your search.

Do you have a banker to recommend? Let us know who–and why. Advice from peers is always appreciated. Also, are there other criteria you feel are worth considering? Post that as well!

John Hamilton is Vested for Growth's Managing Director and the New Hampshire Community Loan Fund's Vice President of Economic Opportunity. More Community Loan Fund blogs.

Community Loan Fund