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Meet the Expert
Managing Partner, Riverside Global Advisors
- As consultant and senior advisor with BFinance and Riverside Global Advisor, provides strategic financial advice to corporate clients on issues related to capital structure, debt financing, working capital management and on optimizing the holistic corporate client-bank relationship.
- Senior corporate banker with 26+ years experience building market share and driving profitability for leading international financial services companies. Customers spanned the manufacturing, consumer products, hospitality, and health care sectors.
- Has led diverse teams across multiple continents in developing and adapting innovative products to solve a variety of international financing needs.
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Bank Selection, Strategy and Relationship Management
Managing Partner, Riverside Global Advisors
- Companies might not have access to the funding they deserve or need.
- Many factors can lead to a tightening of credit. A company's poor performance and government regulations affecting bank behaviors are just two of them. Banks can help a company navigate this changing environment. It is important for a company to be with a bank that genuinely values its business. Banks vary widely. There's no "one size fits all" bank that can be all things to all companies. Small and midsize companies can be easily lost in the shuffle at the headquarters of a big national bank. They may do much better in the branch office of that big bank, or with a smaller regional or local bank.
- There is very little ongoing communication between companies and their banks.
- While it's crucial for a company to establish and maintain an ongoing dialogue with its bank, very few companies make this a priority. Once they have a clear understanding of the business process and know the inner workings of a client company's cash cycle, banks are often able to help their clients in times of need. It's important to communicate, however. Banks do not like surprises. Keeping your banks informed is essential to a company's successful financial management.
- Companies experience a steady increase in banking fees, often without realizing it.
- Once a banking relationship is in place, companies often fail to pay attention to the fees they're charged each month. They fail to notice if those fees begin to increase. When complacency sets in, "fee creep" is a common hazard that can lead to a significant added operating expenses. It's important for companies to stay on top of this. They can create an internal cash management tracking systems that monitor the costs related to their banking services on an ongoing basis.
- Too many companies do business with only one bank.
- It's rarely a good idea to put all your eggs in one basket. It's a smart strategy to work with more than one bank. Establishing a banking relationship takes time. If a company has an ongoing relationship with only one bank, it leaves itself vulnerable to a new regulation or a change within the institution that creates a sudden tightening of credit. In some cases, a bank might decide to opt out of an entire industry and this could leave a company in the lurch. Working with more than one bank also creates a competitive tension that can lead to more favorable fee arrangements.
- Companies are concerned about the long-term stability of the banks they choose.
- For most business executives, stability and financial performance are top of mind as they evaluate where to bank. Ever since the credit crisis and bailout of 2008, there's been more uncertainty about the banking industry. New banking regulations have created added complications. Companies want to know that there are no big questions related to the bank's capital, or it's ability to lend money. They want to know that the bank has proper risk management in place and won't make a mistake with one investment that affects all their other relationships.
- Companies lack clear understanding of their bank's perspective.
- The bank often knows a good deal more about the company than the company knows about the bank. It's not a very transparent relationship. Most companies are unaware of the criteria a bank uses to evaluate its customers. They have little understanding as to how they fit into the mix. They don't stay up on new banking regulations, even when those regulations could affect their access to credit and their bottom line. Companies can miss out on opportunities to leverage their relationship with their bank, and can be blindsided by hurdles that they should have anticipated.
Bank Selection, Strategy and Relationship Management: Common Problems