Spread The Wealth?
The ups and downs of juggling more than one bank
Entrepreneurs are all about growth. They want to grow their
sales, market share, customer base, profits and more. But if their
support system--their accountants, lawyers and, most important,
their banks--are inadequate, growth can stagnate.
When it comes to banks, what's the best approach? Should you
stick with just one for all your financial needs, or maintain
multiple banking relationships--possibly using the small community
bank you started with for the basics, and a bigger institution for
larger loans and more sophisticated services?
According to preliminary results from a study sponsored by the
Arthur M. Blank Center for Entrepreneurship at Babson College in
Wellesley, Massachusetts, entrepreneurs tend to have relationships
with several banks as they grow. "Sometimes these
relationships are simultaneous, but often they're
sequential," explains Julian Lange, a professor at Babson
College and a co-author of the study with Jonathan Levie and Jan
Warhuus. Lange advocates maintaining simultaneous banking
relationships to stimulate competition. He also points out that
using more than one bank can provide you with some insurance in
case one of your banks merges or is acquired, or if your loan
officer leaves for greener pastures.
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Of course, bankers see it a little differently. "I
don't want to have my best customers dealing with another bank,
and every time they want something, they go to both of us to see
who will give them the best rate," says Robert Fazzini,
president of the commercial loan office of Busey Bank, a $991
million institution in Bloomington, Illinois.
Not your concern, you may think. But remember, if you're not
careful, you could be left in the lurch by all the banks you deal
with. "Entrepreneurs have to realize that banks profit on the
services they sell you, and that's why they work with smaller
firms--in anticipation of those businesses growing and needing more
services. If they perceive they won't get more business from
you, banks could lose interest," cautions Lange.
You might be able to circumvent this obstacle by using two banks
simultaneously for different services. But realize that keeping two
or more bankers happy and interested may require an investment of
time you didn't bargain for.
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