Straight Talk — Ideas for Success

Banks are making money, but let's face it – it's tough. There are still a lot of real estate problems to work through; we are going through a broad period of deleveraging, and the general aging of the population means our culture is moving from a borrow-and-spend mentality to a savings mentality. Growing profitability in this environment is going to require some real outside-the-box thinking. Here are three ideas:. 1) Do more asset-based lending. Most community bankers lend on cash flow and don't want to think about managing collateral. Perhaps it's time to think again. Are you turning away borrowers with valuable assets but limited or marred cash flow history? If so, figure out a way to service these borrowers. Figure out monitoring practices that allow you to stay on top of asset quality at these kinds of companies. The better your monitoring, the quicker you can respond, and the less risky the loan. You can charge more for an asset-based loan but if you monitor the collateral properly, it doesn't have to be more risky than a traditional loan based on cash flow.. 2) Figure out ways to share costs with other banks. I have written before about the opportunity banks have to team up to hire compliance officers or backroom processors. Working out the details of such arrangements can seem insurmountable, but they needn't be. Two, three or four banks should be able to pool resources to hire a compliance officer for less money than any of the banks could procure such services on their own. The FDIC has even encouraged community bankers to give this approach serious consideration.. 3) Offer new fee-based services. I have in mind a concierge service for small businesses. What if the bank hired a few people to simply take care of problems for its customers? Say a customer wants to host an event but doesn't have the staff to plan anything on its own. It calls the bank, visits with the concierge and the bank plans an event, caters food, sends out the invitations and even handles publicity with the local newspaper. Clearly, this is not traditional banking but if you want to succeed in the future, I think you are going to need to do more than traditional banking. Small business customers don't need just credit (some don't need credit at all), they need to have their problems solved.. If bankers can figure out how to broaden their pool of potential loan customers, save operational expense, and offer fee-generating non-traditional services, the next few years could turn out to be even more profitable than the best years of the last decade.