By Liese Hutchison
Individuals typically shop around for the best mortgage rate or highest return on their certificate of deposits without considering personal service or a long-term relationship. When it comes to business customers, however, shopping around for the lowest interest rate to borrow money isn’t always the wise choice. True the organization may save a little money on interest payments, but the business owner typically loses out in the long run.
Mitchell P. Baden, executive vice president of Southside National Bank, says the best tip he can give a business owner looking to borrow money is to do some homework on the lender. “It’s important that a lender understand the customer’s business. It’s amazing to me how customers will get frustrated after talking to several banks and not getting the deal done that they wanted,” Baden says. He notes that the deals are typically sound financially, the problem is the lender doesn’t understand the business.
“Most businesses shop around for the best price on office supplies to meet their needs, but they don’t always shop for the right bank,” Baden notes. “There are different needs for a commercial construction company versus a personnel placement firm.”
Jim Saitz, chair and CEO of Missouri State Bank, says his advice to a small business owner is to find a banker who will create a partnership with that business.
“Business owners need to find a strong relationship resource. The borrower needs someone to not only give the appropriate analytical information, but someone who also takes the extra step to know the people who run the company, the industry in which they operate and who will be there not only during the best of times, but the worst, too.” He notes that in the metropolitan area, commercial lending activity is growing between a seven and nine percent annualized rate.
Saitz says of course cost is a factor, but even more important are the intangible resources:
- How well the lender understands the business
- How flexible the lender is to the current funding request
- How flexible the lender is to future requests
- How flexible and resourceful the lender is when the borrower’s projections aren’t being met
- How tightly controlled will the borrower be in the credit relationship
- The capacity of the lender to not only meet current needs but future needs as well.
“All of those factors need to be taken into consideration when looking for a lender,” Saitz points out. “It’s not just price alone.”
Baden agrees. “If you go with a bank that is a commodity supplier that only is driven by lower rates, that bank doesn’t have the room for a non-earning asset,” he points out. “We work more closely with the customers to help them through the problems, so then they’re happy, successful and a long-term client of ours.”
He notes, a company should work with a banker from the beginning. “As we grow with the company, we can provide it with SBA loans or minority loans or Missouri First Link loans when it starts out and work with it as it expands into different credit programs.”
Baden can’t stress enough the importance of personal service. “The business owner has to look at the relationship and whether that banker will be there at his or her beck and call versus price only,” he states. “Our institution is in between; we have relationship managers who carry beepers, but we’re not the highest price in town.” He characterizes Southside as a hybrid bank.
This article was written by Liese L. Hutchison, assistant professor in the department of communication at Saint Louis University and a free-lance writer.
