Choosing a bank for any company is about more than selecting where to stash your deposits or who will lend at the cheapest interest rates. Banks are often viewed as commodities, a dime a dozen in the eyes of businesses, and an afterthought to their day-to-day operations. While not all companies need the same level of sophistication in their banking partner, there is value to be added and much to be gained with a strong financial partner.
Like choosing any advisor, such as a CPA or attorney, competency should be at the top of the list of considerations when selecting between banks and relationship managers. Whether it’s a disruption in the daily cash needs of a business, or a failure to provide critical capital in the long-term, a poor banking partner can spell doom for a business owner trying to manage payments or fund capital projects crucial to their growth. Testing the competency of any bank can be as simple as assessing their knowledge of a business’s industry. Working capital cycles, seasonality and cyclicality, and key business risks and opportunities vary greatly across industries. From contractors to manufacturers to healthcare providers, each requires a partner with an intimate knowledge of the industry and the ability to bring tailored solutions to the table. Another way to assess a good bank and relationship manager is their reputation locally among other professionals. Prioritizing a bank with a strong reputation in your local or regional business community, or relying on recommendations of other trusted advisors like your attorney, CPA, or wealth manager can provide other indirect benefits to you beyond banking products.
Another key consideration is a bank’s support and shared vision for a company’s future. When choosing between banks, consider and discuss not just the current financing needs of the business, but also your vision and growth goals. Take, for example, two companies with growth aspirations: a company growing organically that requires capital for new equipment, facilities, and general working capital, compared to a company targeting inorganic growth through strategic acquisitions. These are very different scenarios, each requiring unique financing and structuring considerations. While some banks will have an appetite for both scenarios, others may not. The optimal bank will not only be able to provide the type of financing that a business needs, but should also provide guidance and thoughtful structuring to set the company up for success.
Put simply, banks can offer much more than most business owners or CFOs realize, or at least a good bank will. Banks should present a value proposition of what they can contribute and how the business can leverage them as a partner for growth. Look beyond interest and deposit rates and towards the higher value a bank can provide when considering this important member of your team of trusted advisors.
Let’s Discuss
As always, our team is available to help illuminate how these insights might benefit your succession planning efforts. If you or one of your clients are interested in pursuing this opportunity, please contact us at info@lazearcapital.com to schedule a discussion as soon as possible.
Jake Harrah
Lazear Associate Jake Harrah focuses on our healthcare practice and clients, including Skilled Nursing and Senior Housing. Jake began his career at Lument (formerly known as Lancaster Pollard), where he specialized in HUD, USDA, and Municipal Bond transactions within the Senior Living, Long-Term Care, and Community Hospitals sectors. Jake also served as Senior Analyst at Fifth Third Bank, covering Middle Market transactions.
He holds an impressive academic background, with a B.S. in Mathematics and a B.A. in Economics from Youngstown State University, followed by an M.S. in Finance from Case Western Reserve University, where he graduated summa cum laude in 2020.
Hailing from Northeast Ohio, Jake enjoys hanging out with his 5 nieces and nephews and playing golf in his leisure time.
