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Be alert to new opportunities to build your local presence
by Jean Wojtowicz, President
Cambridge Capital Management Corporation
Did you buy coffee on your way to work this morning? Was it from Starbucks? McDonald’s? A local café?
Twenty years ago, the answer might have been “local.” More than likely now, one of the national brands got your business.
Coffee is a small thing. Commercial loans are another matter. Each commercial lender reading this article faces more competition now than five, ten or twenty years ago. But the same factors that create more competition for you – the expansion of services by financial firms who formerly did not make commercial loans, banking across county lines and the Internet – can be your tools, as well.
But here is where you enjoy an advantage over some non-traditional or long-distance lenders: you can build a strong portfolio of local businesses. Though small business financing is available many places, it is still an intensely personal business activity. If you are able to drive by a borrower’s place of business every so often, and perhaps trade with them, you can keep track of how they are doing. Looking someone in the eye is always better than an e-mail.
Many of you are familiar with the array of alternative funding programs available for small businesses. You can use them to help build stronger ties to your local borrowers.
The 7 (a) and 504 lending programs are familiar staples from the SBA; and various mezzanine funds and lending pools targeted for minority-owned businesses help complement the opportunities available for business owners.
Alternative funding programs are somewhat like college scholarships; some are based on need and others on ability – most include elements of both. Business loans from alternative funds can provide credit enhancement for the bank or might provide a better structure for the borrower. They even the playing field; again much like scholarships enable students to attend private colleges for about the same price as public universities.
By using different types of alternative financing, you can reduce your exposure in some commercial loans and actually increase the number of local projects in which you participate.
Alternative financing is an important tool in the lending portfolio of many banks; several Indiana banks market their expertise and willingness to link borrowers with the benefits of alternative funding.
Competition will always be here, and it’s bound to get worse. Plan to meet it head on by planning and then capitalizing on alternative financing. And don’t fail to work your own local contacts.
As a loan officer, your best marketing opportunities are almost always going to be with local people you know. Many, and probably most, borrowers would prefer to work with a lender they know by name and will see once in a while.
But you cannot guarantee making a sale simply because you're the person the borrower sees at church or the hardware store. You've got to match, or beat, the sizzle of outside competitors -- and then follow up to deliver the steak.
Making commercial loans is still a relationship – and performance -- business.
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