Banking is a People Business
Small business lending is personal
I recently watched Saving Mr. Banks, released over the Christmas holiday by Disney. I remember as a child watching Julie Andrew’s Mary Poppins and was intrigued to learn the story behind the story. I couldn’t help but remember the bank scene in Mary Poppins when P.L. Travers, the pen name of the author who wrote Mary Poppins—portrayed by Emma Thompson in the movie, flashed back to her father talking about the virtues of young people having a savings account. “Tuppence, patiently, cautiously trustingly invested…” as he fell off the stage drunk.
Mary Poppins didn’t help this young boy’s impression of bankers generally, and Mr. Banks particularly as the stuffy English bankers tried to abscond with Michael’s tuppence to a song with the same lyric. I wonder how many children’s perception of bankers has been influenced by Michael Banks’ experience?
Some partners and I once purchased a small photography supply business. Although we sold professional camera gear, we specialized in the props, albums, frames, and other supplies professional portrait photographers used to do business. Like any other small business, we had a bank and a banker. Looking back, I think I took him for granted, because I’ve since met few bankers like him.
I don’t ever remember meeting him at the bank. He made it a point to spend regular time with us at our place of business. He watched how we interacted with our customers, saw how we did business, and became invested in what we were doing and our success. He realized that his job was about people, it was about us.
There were times when cashflow was a little tight, and he would help us with a line of credit or boost the limit on our credit cards (whatever made the most sense at the time). We were a healthy business, but I wouldn’t say we were the perfect small business customer. I’m convinced, our relationship with him and his with us, motivated him to take things personally. I’ve since met few bankers quite like him.
Mr. Banks sat behind a desk and took a very impersonally approach to his job, this banker didn’t.
I realize the small business lending environment has changed a lot over the last few years. Nevertheless, not too long ago I met a community banker that reminded me of my former friend.
Traci Flynn at Holladay Bank & Trust. Over the last almost 40 years, the bank’s small business lending focus has been real estate-backed loans and they’ve become known for that expertise. In recent years, they started making more traditional SBA-backed small business loans within the 7(a) program (one of the most popular SBA programs). When I asked her what Holladay Bank & Trust was doing differently from other SBA 7(a) lenders in the area, she said, “We work with a lot of small business owners who have good, healthy businesses, but aren’t perfect. They might not meet the restrictive standard of norms and requirements set by the bigger small business lenders in our area, but have proven to be great small business loan customers.”
When I asked her to get more specific about their approach, she said there were four key items they look for in their target customers:
Character and history: The last few years have been tough for everyone on Main Street. When evaluating a potential loan, she wants to know if the business has a good management team, are they current with their monthly obligations, do they have a good product, are they competing well within their market? Sometimes these indicators can mitigate a less than perfect credit history.
“If there’s a good management team and they have some of these other factors in place, we can make a case to the lending board that the business is a good candidate for a loan,” she said. “Of course there is a credit score threshold we won’t go below, but we want to make sure we’re doing the best we can for all the small businesses in our community.”
We appreciate what it’s like to be a small business: “Main Street business customers are what we’ve built our business on,” she said. “Although we do a lot of bigger small business loans, I’m just as happy to help the small business owner who is looking for $50,000. To a lot of the Main Street businesses in our community, that’s a big loan. We understand what it’s like to be the little guy—in some respects, we’re the little guy too.”
I recently read an article written by Ray Hennessey calling for the SBA to be abolished. As editorial director for Entrepreneur.com, I was surprised by his point of view because many of the small businesses he seems to distain, seem to be part of his audience—and they disagreed with him, I might add. There is more the SBA could do to encourage banks to accommodate small business owners just like what Holladay Bank & Trust is doing. Processing the paperwork for a $50,000 loan is just as cumbersome and costly to the bank as a $500,000 loan. Which, the bankers at Holladay Bank & Trust have chosen to do because they see the value within their local small business community. Streamlining that process by the SBA would be a great start.
Speaking of paperwork: It’s not uncommon for the months-long approval process to take its toll on a small business owner. What’s more, “Most banks are six weeks out before they’ll even talk to you about an SBA loan,” said Flynn. “Instead of sending the 20-page packet and wishing them luck, I try to meet with potential borrowers right away. Instead of expecting the small business owner to plow through a bunch of unfamiliar documents, I digest their financial statements and other documents and start the SBA forms myself. That way, the next time we meet, we can fill in the blanks and try to shorten a very lengthy approval process.”
It’s been said, “Time is money.” This is particularly true when applying for a small business loan.
Community lending decisions are made in the community: Of course this is problematic for bigger banks, but the approval process begins and ends within the walls of a single Holladay Bank & Trust office. Everyone involved in the lending process is under one roof, part of the same team, and invested in helping the small business community in their community.
Of course Holladay Bank & Trust might be on the smaller end of the small business lending continuum, but I think they’re on to something. What are you doing to make small business lending personal? Feel free to share any success stories in the comments below.