By Shari S. Cohen
May 1, 2008
The economy is weak and credit is tight in some sectors. Nonetheless, entrepreneurs continue to start new businesses in Michigan and many existing companies are thriving. Whether they are start-ups or long-standing businesses, they share the need for a helpful financial institution, usually a bank. “A bank is part of your work team,” says Susan Monroe, owner of Three Chairs, a home furnishing company. “Partner with them. They want you to succeed also.” Monroe began her business 12 years ago in Holland, Mich., later expanding to Ann Arbor and Indianapolis. She has used Fifth Third Bank throughout this time and has had only two commercial lending officers-rare in today’s environment of banking mergers and restructuring.
Who’s Your Banker Today?
Staff turnover is a frustration because bankers stress the importance of knowing their commercial customers. Business owners such as Randy Seaman, owner of Seaman’s Heating, Air Conditioning and Refrigeration in Grand Rapids, also want a personal relationship with a bank, but Seaman says he finds it’s “the hardest thing for a bank to do. The turnover of staff is terrible in most cases. One bank today is someone else’s bank tomorrow.” Denise Wilmarth, C.P.A., of Criss Wilmarth & Parr in Belleville, a firm with small business clients, says loan officers are seemingly more temporary in the job. “The managers stay longer.” The lesson? Business owners should get to know both their branch manager and loan officer, in case one leaves.
Large Banks Can Think Small
Staff turnover aside, prospective business owners may be skeptical about whether large banks will be interested in their companies. However, some banks’ marketing materials and Web sites promote special departments and services for small business. As Mary Kay Bean, senior communications manager for Chase Michigan, explains, “Small businesses can grow and the bank wants to grow the relationship.”
One way that banks target small businesses is through participation in the Small Business Administration lending program. SBA loans, guaranteed by the federal government, typically require less money down with longer paybacks than conventional loans.
Providing free or low-cost business expertise is another way that banks reach out to small business. Some lenders, such as Chase, Comerica, Fifth Third and Huntington, offer special online resources for small businesses-information about business management and tools for assessing financial needs. Comerica has been offering “Managing Your Business” workshops, available for a modest fee to customers and non-customers, for almost two decades. Topics range from “Hiring and Retaining Topnotch Talent” to “Cash Flow Analysis and Forecasting.”
While these “add-ons” may have some value, they’re not the reason most business owners choose a bank. Some look for a personal relationship while others focus on the availability of specific services with reasonable fees. Don Criss, C.P.A., a partner in Criss, Wilmarth & Parr, recommends that small business owners use only one bank that is conveniently located to save time. “Get to know the people there. That’s more important than saving on fees and interest rates.” Or maybe not. Retailer Monroe points out that credit card processing fees can not only be very expensive but difficult to compare in advance. She quickly changed banks soon after opening her business because the credit card processing costs were much higher than expected.
Wilmarth advises business owners to assess their banking needs and find a bank that can satisfy them, “making sure that they get the right partner if they have expansion plans.” She says that banks will usually consider the owner’s personal credit rating as well as business collateral in making a loan decision. Her partner Criss agrees: “You can’t separate yourself from your business.” Today, Criss says, there are more requirements for loans. “The old days of one phone call and sign here are over,” he says. In his experience, the loan application process is likely to require several months. Banks may give their individual branches some lending authority, but many business loan requests are referred to regional or other loan committees.
Laurel Nicola, owner of Paw Print Inn Pet Resort and Spa in Novi, says she was surprised at “how routine” the SBA process was for her start-up loan last year. The first bank she approached with her business plan rejected her, in part due to lack of previous pet business experience. However, a kennel owner referred her to a Comerica loan officer who was knowledgeable about kennels. In turn she was offered an SBA loan, which she received in about six months. As a result she chose Comerica to be her business bank. “Don’t be afraid to try and get a loan. If you do your research, you can find a bank out there to help,” Nicola says.
Monroe also found it relatively easy to obtain her initial loan. Although she had no retail experience, she had corporate experience, a good business plan and was investing some of her own money. Four of the five banks she approached in Holland were willing to finance her first store. While the first two years were “pretty tough,” she now operates four stores. When Seaman wanted to expand his HVAC business, he looked into the SBA loan program and found bank representatives to be very helpful, although he ultimately obtained a conventional mortgage at another bank. Today, small businesses are responsible for much of the job growth in the U.S. Banks realize that they’re an important part of the economy with good business potential and increasingly treat them with respect.