Small business lending expert shares relationship-building tools

Funding loans is a little more difficult today than it was a few years ago when interest rates were at rock bottom levels. With funding costs on the rise, some bankers are being more careful about lending. Underwriting standards are generally tightening, and most banks are charging more for loans these days..The current environment may actually be better for community bankers than it is for bankers at super regionals and mega banks. Anyone who needs a loan in this environment needs a relationship with a bank; community bankers can offer that. The volume-based, commoditized approach to serving the small- to medium-sized business market that the biggest banks depend on doesn't do very well with personal relationships. .While there is genuine concern about the prospects of recession, this may actually be a great time for community bankers to go after new business in the small- to medium-sized business market. Even with interest rates higher than they've been in years, there will be some business owners who need credit now, or want to borrow in order to take advantage of some limited-time opportunity..Small business consultant Chris Carlson leads a small business sales training company called Core Academy, in addition to serving on the faculties of the Pacific Coast Graduate School of Banking and the Graduate School of Banking at Boulder, Colo. He presented recently in Minneapolis at the spring seminar hosted by the Bank Holding Company Association. Based on extensive study he has conducted in the small business marketplace, he presented several ideas for bankers to connect better with credit prospects in that arena. .Small business owners, Carlson said, have these complaints about bankers: They don't understand the company's business, bankers never visit their business unless it is to bring bad news, business owners hate loan officer turnover, and most banker/business owner interactions are based on efforts to push products. These complaints are common, and I think we can understand why. If small business owners are looking for a relationship with a banker, these factors don't do much to foster the development of meaningful relationships..Start with dialogue .Carlson said one of the best ways to build a relationship with a small business owner is to get them talking about their business. Bankers often approach potential clients with inquiries about the past; bankers ask for information about how the business has done during the last few years. He said a better approach is to focus on the future. "Ask them where they want their business to be in three years and what kinds of things need to happen during that time to get them there," Carlson instructed. .Business owners generally love to talk about their business, especially if they can share thoughts about the company's potential. "Ask them what excites them about the next three years," Carlson said. "Ask them what frightens them. Their answers will give you a roadmap for how to interact with that prospect or client.".Most bankers want to add value to the customer's operations and efforts, but Carlson encouraged bankers to think far more broadly than financial services. "For most business owners, banking is not a priority. It is not high on the list of things they are concerned about," Carlson said. Instead, they are interested in things like finding talent or figuring out artificial intelligence. Carlson encouraged bankers to ask their loan customers about these things and consider whether the banker might be able to tap into their networks to help. "You need to be intellectually curious to help them succeed," Carlson said. Bankers are generally well-connected and leveraging those connections to help a prospect or customer make a little progress is a great way to build the relationship..Offer data access.One way that a banker can dramatically add value to a prospect is by offering to benchmark the company's performance indicators. Carlson suggested that bankers have access to key performance ratios in numerous business sectors, either directly or from third parties, such as RMA. "You could ask the prospect if a banker has ever offered to benchmark their key financial performance indicators with those of their peers," he explained. "They'll say none have ever offered, and this is your opening." .The beauty of the offer, Carlson said, is that if the prospect agrees, you get their financials up front. Furthermore, going over the peer comparison numbers versus can be energizing; the prospect is sure to listen intently. This is the kind of interaction that meaningful relationships are built upon. Carlson encouraged bankers to offer this kind of information independent of any obligation to work together. "If you help people, I am a strong believer in the idea that it will come back to you," Carlson said. .Many banks have a service plan for their loan customers that starts with an on-boarding process. Many typically take the customer through the first annual review. But Carlson challenged bankers to do better. He said the review is typically for the benefit of the bank more than the customer; is there a way the review could be structured to be meaningful for the borrower? Carlson encouraged bankers to discuss the ongoing service plan upfront, while discussing the details of possibly working together. A customer is far more likely to value the ongoing contact with the banker if the two of them have worked out the details of what that looks like ahead of time. And, it should look like something that adds value to the customer as well as the bank..Become a trusted advisor.A banker should be a trusted advisor for a business owner. Other trusted advisors might include the business owner's attorney, accountant, and key vendors. Carlson said a banker might want to distinguish themselves with a slightly different role in this group. He said the banker could offer to assemble the group at an off-site location for a meeting of a half-day when they all contribute ideas about helping the business owner succeed. This kind of a meeting, similar to a mini-strategic planning session, would be tapping the brains of many people familiar with the business, who all have an interest in seeing that customer succeed. "This way, instead of being just one more person in the band, you are seen as the conductor," Carlson commented. .Should participants be compensated? Carlson said that should be left to the judgment of the customer. In some cases, it might work to offer everyone a flat stipend of, say, $500; in other cases, you might decide to pay their typical hourly rate. In other cases, depending on the vendor, they may be willing to participate for free, based solely on the value the vendor places on the relationship with the business owner. .Bankers might also consider hosting events for groups of customers or prospects, positioning their institution as a thought leader. "Consider hosting events on targeted topics for business owners," Carlson suggested. He said business owners don't typically think of their bank as a source for these kinds of events, so a bank can make a big impression with them if they choose to go this route. Carlson said a viable format may be to plan one large annual event, and then smaller, more frequent events. These could be monthly "lunch and learn" sessions or quarterly breakfast gatherings..Start a podcast.Finally, Carlson encouraged bankers to consider creating a podcast featuring small business owners or managers as guests. Timing of episodes can fit the banker's availability, but the podcast should be about small business, not about banking, Carlson urged. "Ask the business owner what they do, what challenges they see, how the market is changing, things like that," Carlson suggested. .A podcast gives the banker a pretext for approaching small business prospects. The interaction should be about creating a good podcast, not about pitching financial services and products. "Now you have given this prospect something valuable they can use to promote their business," Carlson said, reminding bankers that most small business owners don't have a lot of money to spend on marketing. .Through the podcast process, the banker gains the opportunity to stay in touch with the business owner, and promote the bank's products and services over time. Having established the relationship by working on the podcast together, the banker will already have a relationship to leverage into something more. Carlson noted that podcasts are relatively simple to produce and do not require expensive equipment. Podcast audiences are growing all the time, including in the small business niche..Carlson's suggestions are worth considering. Credit from a community bank is not a commodity. It does take a relationship to forge a business partnership on any level. All this takes time, of course, but the hope is that relationships that have to be earned are ones that are reliable and sturdy. While the business climate and the rate environment are always changing, the fundamentals of personal relationships in business are generally solid. Best wishes as you go out and pursue new relationships in the small- and medium-sized business marketplace.