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BEYOND THE TRANSACTION: The Power of Relationship Banking for Small Businesses

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BEYOND THE TRANSACTION: The Power of Relationship Banking for Small Businesses

By:  Chris French, Vice President, Commercial and SBA Lender   |   MLO NMLS ID# 1151173 
As a small business owner, you likely wear many hats to keep your business running. With significant responsibilities on your plate, it can be challenging to find the time and expertise to manage all the vital aspects of your organization effectively. Relationship banking is one simple way to support your business and secure financial guidance for success. It’s a way independent organizations can access the foundational knowledge they need to manage their finances, grow their business, and achieve their goals. In this article, we’ll explore what relationship banking means, the benefits it offers and why it’s essential for small businesses.

It may not surprise you that relationship-based banking is precisely what it sounds like. There are two elements: first, a financial institution offers a wide variety of products and services beyond basic banking and second, it provides personal service and connection to its clients. From a big-picture perspective, relationship banking is not a transaction that’s “purchased” overnight. It is a long-term partnership that is earned based on trust, communication and understanding.

Relationship banking may, and likely should, look different for everyone. The most significant benefit is that these institutions can tailor the way you bank aligned to your needs, or the needs of your business. They will provide customized solutions after discussing your goals and any challenges you face. For example, banks that offer this more customized style of banking can tailor their products and services to meet what your business requires, and they can offer more flexible terms and repayment schedules.

Relationship banking also provides unparalleled access to expertise. These banks have seen hundreds of other small businesses succeed – and fail – and they can provide financial advice based on those learnings to help ensure your business’s success. They can also provide mentorship and guidance to owners, helping them grow and succeed, a significant asset to business owners whether they are just starting or well-established.

These banks also tend to be highly responsive, meaning you won’t have to wait a week for a response or risk battling your way through an answering service just to speak with someone across the world who doesn’t understand your circumstances. With relationship-based banking, you have a direct line of communication to a banker nearby who understands the market and your business’s unique needs and challenges.

Another benefit of relationship-based banking is that this model is typically offered by local banks, meaning there is an added focus on the community. These banks support both their clients via referrals as well as non-profits, and, another added value, they typically offer networking opportunities for small businesses as well.

Related to having a relationship where your business is established, banks that follow the relationship-based model can process loans faster. This is because lending decisions are made locally, by people who understand the market in that specific area best. They use that knowledge to help make better decisions for clients.

There is a common misconception that relationship-based banking comes with a cost. Quite the contrary, local banks can offer competitive rates and fees with value. Certain account types require no minimum deposit or account balance, and a banker will happily discuss which options will best fit your business needs. Additionally, the knowledge and support you receive can help you save money in the long run by avoiding costly mistakes and making better financial decisions.

Small businesses are the backbone of the country. They need strong support to succeed, and relationship-based banking is one way to obtain that essential assistance. Relationship-based banking offers personalized services, expertise, flexibility, responsiveness, and community-minded decision-making, all of which are critical for independent ventures to thrive. So, if you’re a small business owner, consider relationship-based banking and take advantage of the benefits it offers. At Bank of the Bluegrass, we offer all the value you read about in this article, alongside best-in-class technology, right here in Lexington.