For Small Business, Choosing the Best Bank Starts With the Right Banker

For small businesses, it’s sometimes the banker, and not the bank, that makes the difference.

That came across clearly in an episode of SMB TV, where PYMNTS’ Karen Webster was joined by Ryan Gunderson, president of Minnesota-based Superior Fuel, and Erin Wynn, director of product management at NCR.

Operating in the highly volatile energy sector — primarily propane — Gunderson was unequivocal in his belief that the banking relationship for small and midsized businesses (SMBs) is personal, so much so that he’s switched banks three times to stay with the same banker.

“Our relationship with our local bank is one of the strongest parts of our business. Our industry is very capital-intensive. Our relationship with our bank is on a CapEx [capital expenditure] need, buying tanks and securing supply.” When energy prices spiked, his capital requirements changed.

When Superior Fuel needed extended credit lines, its banker made it happen. “What we look at is having that relationship where it’s a give and take,” he said. “We work together, they understand our needs. There are times that they need to push back, and we’re willing to listen.”

It was the same several years ago when energy prices went to historic lows. In either case, Gunderson said, “Our prices are always fluctuating, but it’s when you have somebody like that who understands it, they don’t call you in a panic.”

Wynn said SMBs got a taste of this dynamic in 2020 when large banks gave PPP loans preferentially to larger clients. That caused a rethinking of many SMB banking relationships, and community banks ended up with new SMB clients who felt more appreciated.

“I think they were able to establish those relationships, and as Ryan was saying, it goes a long way because you understand that business from that banker’s point of view,” she said.

What rides along, however, is, “How do you expand that and service [SMBs] across the board with deposit relationships and other needs that they have outside of commercial lending, which I think a lot of banks and credit unions are trying to figure out.”

Read more: In Digital Banking Showdown, Traditional Financial Institutions Play Up Innovation and Trust

Loyalty to Bankers vs. Banks

While Superior Fuel still handles a high proportion of payments via paper checks, Gunderson said the company has leaned into certain digital tools and faster payment methods to close the cash flow gap and streamline its receivables, using ACH and tokenized payments.

Some payments come through authorize.net and automatically deposit into their account and reconcile the AR automatically, he said. “That’s what we’ve done to make our business more streamlined. As a small business, we have to do more with less,” and banks can’t do it all.

Sometimes as the supplier, Superior also provides bank-like services, typically to large industrial customers having their own cash flow issues. “Many times, we become the bank,” he said. “Whereas if [clients] had those relationships and understood their needs and worked better with local banks, we wouldn’t be put in the position of being a lending institution.”

That’s the kind of issue that branch banking traditionally solved, and Wynn said it still does.

“Financial institutions need to think about how to direct support to the appropriate areas. Is it all funneled through the call center, where they’re not getting that personal touch, or is it being directed to a personal banker whom they have that relationship with?”

Wynn observed this in the past few years as credit unions mainly went about acquiring community banks as service needs and delivery modes changed. “They had to shift their support model to give more of that white glove service to those new customers that they have that are coming from that bank regarding those business needs,” he said.

That underscores Gunderson’s faith in the one banker he’s followed from one financial institution (FI) to another.

“We weren’t loyal to the bank, we were loyal to the individual who understood our business,” he said. “Small businesses want that face, that person they can go talk to when times are tough. It’s a lot easier to move on from the bank when you don’t have that relationship.”

See also: Banks Turn to Tech to Keep the Human Touch in SMB Digital Banking

Facing Tough Times With Truth

Wynn and Webster both pointed to the potential problems of SMBs sticking with individuals over institutions, but such is the loyalty to a banker who acts more like a team member.

“As Ryan was saying, a lot of times other [banks] may not have understood his business as it was a commodity, and the price ebbed and flowed,” Wynn said. “Get to understand those businesses and don’t ignore the tiny ones because they have the opportunity to grow.”

Showing the value of that relationship, Gunderson recalled that a year ago, his main supplier of generators notified customers that lead times were moving from four weeks to nine months. Superior Fuel sourced and purchased every generator it could find and needed extra capital.

Access to capital enabled Superior to buy $1.5 million worth of generators in a forward-thinking move that paid off for them as they watched underfinanced competitors go under.

Even so, he’s “nervous” about macroeconomic conditions in 2023, wondering, “Can we continue to spend at that rate buying tanks and buying trucks? If our customers are struggling to pay their bills, it’s going to be very hard on us and put stress on us.”

Wynn echoed that, adding that a strong SMB banking and third-party FinTech relationship helps “provide those tools that make it easier for their businesses to collect those receivables in different ways, in a much more automated way [is important].”

Trust and transparency go with this. Gunderson noted that his bank “sees our inventories, they see our accounts receivable. That’s key with a bank because I’ve looked at the financials of smaller businesses and run the numbers. You’re out of business, you just don’t realize it yet,” because less involved banks kept making loans “rather than having a very frank conversation.”