2B — May 30 - June 12, 2014 — Owners, Developers & Managers — M id A tlantic
Real Estate Journal
O wners , D evelopers & M anagers By Glenn Ebersole, Hollenbach Construction Single or multiple banking relationships? What to do?
S trategic business relation- ships are important and in today’s ever chang-
sometimes they actually rely on just one person, to support their banking needs. Having just one bank for all of a company’s financial needs is a risk, partic- ularly during challenging eco- nomic times, such as the “Great Recession,” which is when the business needs them the most. During good economic periods banks support growth. During economic downturns banks can help lessen the negative impact if there is a strong relationship and/or relationships. A strong positive banking relationship is a strategic busi- ness tool. However, it seems unlikely that a single bank can provide all the services that a business needs all the time. Businesses grow and change and their transactional and strategic long term banking re- quirements expand and become more complex. As business needs become more complex (beyond just a checking account) it becomes important to start building multiple banking relationships. Furthermore, it is also impor- tant to develop, maintain and enhance strategic relationships
with more than one individual within each bank. It can be a challenge to main- tain multiple banking relation- ships. Strategic thinking is required to negotiate a loan or line of credit in the multiple bank environment as well as to be sure to continue to reach out to other banks and spread out your business. The exclusivity of a single banking relationship may be a benefit in the short term (e.g. reduced fees and lower rates), but in the long term it also may be beneficial to “court” other banks and spread around your banking business. When the need arises for a different set of services, it’s best not to start over with a new banker. A few relationships with multiple banks can be a real asset and also a positive contingency in the event of mergers and ac- quisitions that could negatively impact a current banking rela- tionships. Loans for vehicles, equip- ment, and real estate some- times are ways to start building new banking relationships for continued on page 3B
ing business world a busi- ness needs to take a stra- t e g i c l o o k at those re- lationships. One of those major rela- t i o n s h i p s
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that is reviewed by businesses is banking. My personal ex- perience and a scan of some research indicates some inter- esting results. Research data indicates that a largemajority of firms borrow for the first time from a single bank. However, soon after- wards, many of them switch banks and others start to bor- row from multiple banks. Why do firms switchbanks or start to borrow from multiple banks as opposed to continuing to borrow from one bank and improve on the relationship with it? What are the implications of these changes? Many businesses rely on a single banking relationship and
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