Business borrowing

If it's time to expand, don't let rising rates squelch your plans — just work with your banker to find the best path forward

It’s an exciting time for any business owner — having the kind of sales or growth that necessitates expansion or new equipment.

While the growth is something to celebrate, most folks find the cost calculations and paperwork for a loan more of a chore.

But gathering the documents, finding the financial statements and writing a clear and detailed proposal can make the process much smoother — especially when you take the application to a bank that already knows your business.

We spoke with several Alabama bankers who have extensive commercial account experience, and they all agree — having a long-term personal relationship with your banker is crucial to your business for a variety of reasons.

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Guy Davis Jr., president and CEO of Marion Community Bank, says most people look at banking as a commodity, but not all banks are created equal when it comes to small businesses and having those relationships starting early is key to getting the most for your business banking needs.

Guy Davis Jr., president and CEO of Marion Community Bank.

“I would say the best time to approach a bank is when you don’t need a loan, because we believe very strongly that banking is about relationships,” Davis says. “The more we can get to know you and your business over the course of time, the more responsive we can be to your needs.”

Davis says the more services and products that a business customer uses with his bank, the better pricing they are going to be able to get on their loan.

“If you have your personal accounts with us and you have your commercial accounts and your merchant or commercial credit cards with us and your deposit accounts with us, I can certainly justify offering a lower rate because of the overall profitability of the relationship,” Davis says. “But if the only thing you’re doing is calling 10 banks to get a rate, I can’t give my most competitive rate in that situation because that’s the only thing I have with you.”

Davis says it is easier for him to work with businesses over a long period of time because he gets to know the inner workings of the business and what its needs are. He also says that despite climbing interest rates, it’s important to tackle the needs of your business to help further promote growth.

“I have several trucking companies that I do business with, and the price of trucks has gone up 50% in the last 12 months, but they still want to buy trucks because the business demand for the use of that truck is still there,” Davis says. “The interest rate may be a little higher today, the cost of the truck is certainly higher, but the business analysis of buying that truck makes sense even in a higher interest rate environment. There’s a tipping point there for sure. If the interest rate goes high enough, you can’t generate the return that you feel is necessary to invest in that equipment.”

Ginger Blake, executive vice president of commercial banking solutions at Regions, says it’s best to come well prepared and well documented to any meeting with a banker about a potential loan.

Ginger Blake, executive vice president of commercial banking solutions at Regions Bank.

“I always like to tell people more is always best because, as a small business owner, you want to come in and tell not only the story of your business, but also your financial story,” Blake says. “So, most banks are going to look at trends when it comes to a business. Being prepared with a minimum of two, sometimes three years of financial statements, as well as tax returns for the business. If there are perhaps pieces of equipment you need because of a contract you just won and it’s really going to expand your business, share that with your banker. At the end of the day, you and your banker are creating a story about your business that puts you in the best spot to get the loan that you need.”

An Auburn grad, Blake has been with Regions for 24 years. Her experience has given her a lot of insight into the needs of business owners but not as much into the projection of interest rates. She says despite the climb, businesses should make the moves necessary to stay competitive.

“I wish I had a crystal ball and could tell you what the rates will do, but I don’t,” Blake says. “I think we all listen to the media and suspect that they will continue to go up, but none of us know for sure. I would say that if I’m a customer, if there is something that I want to do, whether it be a home purchase or a renovation — if I’m a business owner, there’s a piece of equipment I want — I would say if you’re fairly certain you’re going to need it, I would go ahead and start talking to your banker today.”

Charles Kramer, commercial team lead and senior lender at Progress Bank, says we are living in volatile financial times and having a good banking relationship before you need a loan is key.

Charles Kramer, commercial team lead and senior lender at Progress Bank.

“I think each person is going to have different wants in what they want for a bank,” Kramer says. “Some people want a larger product offering with the best rates available, some prefer a smaller bank where everybody knows their name there and they have a smaller feel to them where they have that deep-rooted relationship with their banker. I think what they should expect is a trusted advisor, similar to something like an attorney or a CPA. They need to have somebody who is going to provide sound advice. Again, know your business and know what your goals are so that they can help you map out a plan and put you in the right credit products to help you achieve your goals.”

Kramer says while some people value the relationships they have with their banker at a small institution, others prefer a larger bank with more services.

“At the end of the day, we all are able to service your money, we’re all able to offer fairly competitive interest rates; you know we’re all usually in a similar ballpark,” Kramer says. “It really depends on what individual you need. I can tell you this in being in the industry, it’s a very competitive industry. So, if someone was not happy with their relationship or didn’t feel like they were getting the service or the products they wanted, I’m sure they could find another institution that could do that.”

Ultimately, where you do your business banking on a day-to-day basis or for growth needs is up to you. Keeping detailed records for when that day comes will make walking in the door and speaking to someone a much smoother process. Whether you’re choosing between a large bank or a credit union, or you are deciding whether or not to jump in during an interest rate hike, Blake says having a dedicated banker who knows your business and what you’re trying to accomplish is what she recommends.

“Finding a bank that knows you and is willing to grow with you, and that can come in many different fashions,” Blake says. “It could be a smaller bank; it could be a credit union; it could be a bank the size of Regions or a bank the size of PNC. I think it’s really based on your relationship with the individual. If you have someone at the bank who’s dedicated to knowing you and knowing your business and is there to provide advice and guidance, that’s the best spot you can be in as you’re growing your business.”

Crystal Castle is a Mobile-based freelancer for Business Alabama.

This article appeared in the July 2022 issue of Business Alabama.

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