Are You and Your Banker a Perfect Match?

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Imagine logging on to BankHarmony.com in search of the perfect banker and stumbling on this profile:

The one thing I am passionate about is:
Helping small business owners grow their businesses.

The three things I’m most thankful for are:
Customers, customers, and customers.

My friends describe me as:
Generous, hard-working, flexible, creative, and a good listener.

Three of my best skills are:

• Being able to convince my colleagues to sign off on a loan I believe in.
• Working with business owners to solve their problems.
• Always going the extra mile for my customers.

I spend my leisure time:
Talking to business owners and learning what it’s like to be them.

I can’t live without:
Customers.

The last book I enjoyed was:
Finding Money: The Small Business Guide to Financing by Kate Lister and Tom Harnish. It told the real story about how to find lenders and investors. (Disclosure: Kate is the author of this article.)

The traffic on this guy’s profile would probably melt down BankHarmony’s server.

Well, since BankHarmony doesn’t exist, how do you find a good banker? Does size matter? How do you know they’re not next on the list of government bailouts?

Finding Your Dream Banker

Accountants, attorneys, and other small-business professionals are a good source of advice. In fact, a referral from someone the bank knows and trusts may get you a little extra attention.

You might also want to:

• Ask for referrals from local businesses — preferably those in similar industries so the lender will already understand your business.
   
• Order Dun & Bradstreet reports on your competitors — their lender’s names are often included in the report.
   
• Pay a virtual or actual visit to your local SBA office and pick up a list of the most active SBA lender in your area.

Does Size Matter?

Smaller regional banks often have the advantage of being light on their feet. Their loan approval process may be more streamlined than that of larger banks. In some cases, you’ll even get to know the senior people behind their decisions. But don’t expect their credit criteria to be lax — with smaller portfolios, they need to be extra careful about marginal deals and industry concentrations.

Before you decide on a small bank, ask whether they’re likely to be gobbled up by a larger bank any time soon. Mergers and acquisitions often mean changes in personnel, services, pricing, and risk tolerance. Also, ask whether the bank will be able to handle your credit and non-credit needs as you grow. Depending on their size, they could have trouble accommodating a multi-million dollar loan without bringing in other bank lenders.

Large banks typically run their small-business lending on the branch or regional level. This allows them to operate more like neighborhood banks, but some are less interested in the small end of the market than others, and personnel turnover can be greater as their lenders have more upward mobility. Keep your ear to the street for who the friendly ones are.

Are They Healthy?

While the worst of the banking system meltdown is hopefully behind us, it’s still a good idea to keep an eye on your bank’s financial strength. Even though your deposits may be insured, if a bank goes under comes under the scrutiny of the federal regulators, "it" does roll down hill. 

While it isn’t BankHarmony.com, BankRate.com offers a Safe & Sound® rating system to help you avoid the real losers. Too bad the dating sites don’t have that.