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Banks And Banking Conversations


Few activities impact more individuals and small business owners than banking. Whether we like it or not, banks play a major role in the functioning of the economy. When their normal role is disrupted, it becomes apparent very quickly. Striking examples of financial disruptions involving banks recently appeared in 2007 and 2008. This was followed in short order by a government and taxpayer-funded bailout of the banking industry.

It is a point of disagreement whether the recent banking crisis is over or whether there has been noticeable improvement in the banking system. The prevailing conclusion is likely to be different depending on who you talk to or which aspect of banking is analyzed. From the perspective of small businesses, it is hard to point to many financial services provided by commercial banks which have improved during the past five years. Commercial lenders have effectively restructured in their own way as much as the automobile industry, and one of the business areas which has been reduced to a small fraction of the previous levels is small business financing.

To the extent that a small business owner still has a need to deal with a bank, the primary precaution should be to realize that most banks have changed in ways that are not always obvious or even publicly acknowledged by many commercial banks. This can result in multiple challenges and frustrations, but effective strategies can be formulated if the problems and constraints are identified in advance. Improved negotiating and business lender communication are both likely to be critical elements in achieving success when dealing with this relatively new banking world.

For many small businesses, dealing with bankers has never been a preferred activity. Being forced to look elsewhere because their bank is no longer able to help will prove to be a benefit for many. A surprising number of bank services are available from various competitors at much lower costs than prevailing bank fees. Credit card processing costs are a prime example of a business operating expense that is an excellent candidate for reducing in many instances.

Business debt reduction as well as reducing operating expenses are additional benefits when small businesses are forced to evaluate what to do when their bank says no to various commercial financing requests. Banks are now saying no more frequently to many small business loans, so it will be helpful to understand that such an adverse result is not an isolated situation. Firing your bank and banker might also need to be considered when all else fails.

By: S.A. Bush