Relationship Banking 101
As a business owner, you know the value of having a good relationship with your customers. It's not always about pure transactions but instead the trust and loyalty you build. After all, that's what keeps customers coming back.
The same should hold true with your bank. Your bank can offer far more than business loans and checking accounts. Having a more personal relationship with your bank can benefit your business in the long run.
What is relationship banking?
Relationship banking is a concept that moves beyond transactional banking and into something more. It's when a bank really gets to know their business customers—including their needs and concerns—and works together to come up with solutions and services that make financial sense.
Relationship banking succeeds when it focuses on the individual. When you work with a bank that has this kind of culture, it's like having your own private banker dedicated to your business.
Whether you're starting a business or growing, having a banker in your corner ready to help navigate your financial needs means something. When you feel confident that your bank is dependable, trustworthy and prepared to proactively help your business, it can give you peace of mind that you've found the right partner.
What are the benefits of relationship banking?
Relationship banking is exactly what it sounds like—an individual or business owner building a trusted, long-term relationship with their banking institution, usually directly through a specific banker or account officer.
Services and solutions
This high-touch personal service gives you access to comprehensive solutions your bank offers. This might include loans, lines of credit, business credit cards to manage and track spending, insurance and safety deposit boxes. Your bank might also provide business services, such as payroll process and automatic payments, or international services like letters of credit.
Relationship banking also includes strategic advice from an experienced banker, who has a vested interest in seeing your business meet its goals.
For example, if you run a seasonal business or experience inventory fluctuations, your relationship banker can offer tools and strategies for managing cash flow during those cyclical variations. By getting to know your businesses and accounts, your banker can become a trusted partner who can make recommendations on products and services.
Goal-setting and investments
A relationship banker can also help you think proactively about reaching your longer-term goals. If you're planning to expand internationally, they can identify key investments to make and partnerships to form in the months leading up.
They can work with you on a strategy for exiting the business or transitioning it to a partner or your child when the time comes.
If you need help managing personal wealth, your business banker can pair you with your bank's wealth management division and make sure the two strategies align.
A bank's center of influence
Banks embedded in the local community can help you build relationships with other businesses (PDF), community organizations and even potential customers. Banks are experts in the local economy and have connections throughout the entire community.
As your company grows, your banking needs will grow, too. Having a relationship banker as an ally can help save you money through lower fees on bank products such as checking accounts or credit cards. Their insight may also help you consolidate redundant accounts.
A relationship banker will also get to know the details of your business. They can also advocate for you when you seek a loan, helping you calculate whether to apply for a business loan or line of credit, as well as find better rates or more favorable terms.
Relationship banking versus transactional banking
At the opposite end of the spectrum, transactional banking focuses on services offered to customers, including business checking and savings accounts, and getting them to use as many as possible.
Both types of banking hope to create efficiencies that improve customers' lives. You might see that in the form of online banking and apps. But where transactional banking provides these tools, sets you up with services and leaves you to figure out the rest, relationship banking proactively helps you get the most out of these offerings.
As your business grows, you might need loans or other financial tools to function. Having a bank that understands your business and is willing to offer more flexibility can provide a massive boost during critical times. That's the benefit of relationship banking. Your banker becomes a financial strategist who can tailor packages of products and services to your needs, provide flexible rates and credit approvals, and help you meet your business objectives.
Because transactional banks rely on online forms or complex algorithms to provide hard answers on loans or other applications, they don't always offer that type of flexibility. For some customers, that can hamper the long-term potential of your business.
Assess your banking needs
As a customer, the differences between these two types of banking can be significant, especially if you know you have specific banking needs.
For many business owners, this is the dilemma in choosing a bank that focuses on relationship banking versus transactional banking. However, it doesn't always have to be an all-or-nothing choice. If you're currently working with a bank that feels more transactional, you can make an effort to get to know your banker. Schedule a time to meet with them in person. Let them know about your business and some of your needs. It could be enough to start moving the relationship to something more personal.
How to build a relationship with your bank
Like all good relationships, building a banking partnership takes time. It typically starts with opening an account, but that's just the beginning of what a relationship banker can offer.
Be proactive and seek out your banker's advice every step of the way. Ask them about the products and services their bank offers and how they align with your business and financial plans. Be open and transparent with all the details of your business. The best way to leverage relationship banking benefits is to provide a complete picture of your business, including any challenges you're facing.
Set up regular strategy sessions to discuss your near-, mid-term and long-term goals and how your financial institution can help meet them.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.