The Dodd-Frank financial reform legislation includes several points that have made it more difficult for community banks to operate profitably. These issues include higher capital and equity requirements, and heavier regulatory burdens and costs.

The need has become even greater for community banks to pursue deeper relationships with their small business customers and offer value-added services beyond lending. This provides an opportunity for community banks to leverage their competitive advantage as trusted advisor and offer solutions for customers. One way to add value is recommending appropriate banking products and services that can help your small business customers grow. Expanding the number of helpful products a customer uses makes them “sticky” and increases their loyalty to your bank. This makes them less likely to shop around just to get a lower borrowing rate.

Know Your Customers
Each customer has unique needs depending on the stage of business development they are in. Newer companies that are growing can often benefit from treasury management and risk management services. Established businesses, meanwhile, often need help with succession and estate planning. Having conversations with your customers and asking the right questions about their business concerns can open doors for other product offerings.

A few of the products that may help them include:

Cash and treasury management – Many small businesses today could save time and resources by using ACH and EFT, remote deposit capture (RDC), cash concentration, and check fraud detection tools as a part of their daily operations.

Online and mobile banking – Online banking is a must-have service offering for community banks wishing to serve small business customers. Mobile banking apps are also becoming more popular as a tool for small business owners, as the proliferation of smart phones increases.

Wealth management, private banking, and estate planning – Small business owners can also become high-net-worth individuals who will need assistance with wealth management and private banking services. This can also lead to estate planning and succession planning down the road.

“Do It Yourself” or partner with a professional?
Hiring or training qualified employees who specialize in these areas is important, if these products and services are offered in-house. An alternative option is partnering with local service providers, like wealth management and financial planning firms, to offer them. The most important thing is keeping the trust of customers, so the decision should focus on how their needs are best met. The Consumer Financial Protection Bureau (CFPB) offers guidance in CFPB Bulletin 2012-03 to help banks reduce the risk involved in relationships in which third-party vendors are given access to sensitive customer data.

No matter how additional services are offered, it is important to deepen the relationship with small business borrowers. Contact us if you would like to discuss competitive strategies in more detail 417-881-0145.