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How to improve your relationship-based banking

March 17, 2015
Read Time: 0 min

According to the latest FDIC Quarterly Banking Profile, community banks continue to thrive and lead the industry. As more banks turn profitable – 90.3 percent achieved that threshold in the fourth quarter of 2014 – they aren’t just competing with large, national banks; their community bank counterparts also account for much of their competition. Unfortunately, competing on price alone is not likely to get you far in today’s environment. Rather, forming and improving lasting relationships with current and prospective customers can serve as one way to stand out from the competition.

Community banks have historically been a step ahead of larger banks in relationship-based lending; they know their customers and their community well, and offer a level of personalized service that is difficult to replicate in larger organizations. But as competition ramps up, just offering personalized service may not be enough, either. A recent article by Randy Wardwell on BAI Banking Strategies highlighted eight tips for building winning relationships with your borrowers. Here are the top five:

1. Lenders should listen carefully. Wardwell notes that doing too much talking can result in not fully understanding the problem and being unable to offer a viable solution.

2. Lenders shouldn’t assume their borrower is on the same page. Wardwell suggests summarizing back to customers what you’ve heard and ask for confirmation that the information and needs are correct. “Assuming can have disastrous consequences for both sides.”

3. Lenders should make connections. Wardwell suggests taking the time to get to know about your customer’s family, as well as what they like and don’t like. Building the relationship could ultimately result in more business down the road.

4. Lenders should add a personal touch when appropriate. Recognizing anniversaries and birthdays, as well as hand-written thank you notes are a couple of options. Wardwell cautions against going overboard, though, as it could come off as superficial or gimmicky.

5. Lenders should recognize when it isn’t a fit. Not every loan will be a fit for every bank. Lenders should realize this and know it is okay to turn down the business, Wardwell notes. “Borrowers will respect you more for being honest, and there’s a really good chance they will be back to give you other opportunities.” Just be sure to provide the borrower with information about why you can’t make the loan, and what they can do to improve.


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Relationship-based lending can benefit both parties of the transaction. If the borrower has a longstanding and responsible relationship with the institution, there is potential for greater credit availability and lower collateral requirements for the borrower. At the same time, establishing a relationship with a borrower increases chances of winning any future loan business that borrower may seek.

In fact, some borrowers may be willing to pay a slight premium to borrow from a bank with which they have a strong relationship. Banks should recognize that deeper, longstanding relationships can mean additional revenue from multiple product lines or loans, and the potential for referral business.

About the Author


Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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