Lessons from America’s Top Commercial Lenders

The current environment is very challenging for commercial lenders. Even with higher interest rates, a weak office market and inflation, there are still good business opportunities for forward-thinking commercial bankers that follow these proven strategies, which we’ll cover in today’s blog.

These are the lessons worth learning from America’s top community bank lenders, which were featured in a recent issue of ICBA’s Independent Banker. Every commercial client is different and each deal has its own intricacies, but the tactics outlined in our blog can be applied to a variety of relationships and opportunities, creating wins for everyone involved.

1. Get Creative

New York-based Spring Bank, for example, has kept an open mind about lending to small businesses that many other commercial bankers ignore – small restaurants, mom and pop retailers, nonprofits and other community-oriented businesses, as discussed in an Independent Banker article.

In an article for Independent Banker, Akbar Rizvi, president and chief lending officer of the $428 million-asset community bank said, “The South Bronx is the poorest congressional district in the United States. I can tell you firsthand that our clients and customers are not borrowers that fit into checkboxes. We take the time to understand our customers and see how is it that we can help make sense of the story and see if there’s a fit. We’re not afraid to roll up our sleeves and get into the weeds in terms of what the request is.”

For bankers to do achieve this, a blend of technology with a human touch is key. For example, our long-standing client, Berkshire Bank, which serves various areas of New England, uses a combination of technology and personal service to benefit its customers and, in turn, to help drive the bank’s bottom line.

Scott Gillanders, the bank’s credit director, refers to the bank’s strategy as “digitouch” – which he defined as having access to the best technology, and providing the technology’s capabilities to customers, along with the best personal service. Gillanders discussed the bank’s philosophy in a recent Baker Hill podcast, where he posed the question, “How can we provide financing for your small business to leverage assets and grow opportunities for you and your family and, and the community at large?”

This philosophy has proven successful for the bank, as Berkshire Bank has experienced notable growth over the last 20 years. Today, Berkshire Bank manages more than $12.1 billion in assets and has seen a 10X increase in total loan production since partnering with Baker Hill more than 20 years ago.

2. Be Consistent

While each commercial client and deal will have its own nuances, bankers have to be consistent in their workflows, from application to decisioning – for the benefit of the bank and to keep regulators happy.

That’s why modern decisioning and underwriting software is critical for success. These technologies can analyze and evaluate commercial applicants’ risk profiles based on comprehensive data, including financial history and credit reports, much more consistently and efficiently than a human – or a team of humans can.

The support from automation and greater consistency in how credits are analyzed can also help uncover solid opportunities among businesses that might be turned down by larger lenders for being too small or too immature, even if all the other financials are in excellent shape. This is the approach Currency Bank has taken and it’s paid off. The bank’s chief lending officer and executive vice president, Scott Gaudin worked for University of Alabama football coach, Nick Saban and learned the value of consistency, especially consistent behavior. Because of this, he gives each and every borrower thorough attention. When a local brick mason approached Currency Bank for a line of credit, the mason had been denied by a large bank that had deemed the business as “not mature enough.” Currency Bank took a deeper dive into the business’s financials and saw that invoices were always turned around very quickly, which led Currency Bank to approve the deal. Since then, the bank has helped the business more than double in size.

Statement spreading software and other similar tools can essentially help a banker dive deeper into the data points, which brings us to the next point.

3. Dive Deep

While many commercial bankers focus on specific geographies – which can provide some benefits – commercial bankers who focus on specific industries can be incredibly successful due to their intimate knowledge of those industries.

With that focus, the bank can expand its geographic footprint because certain successful businesses, such as small doctors’ groups, dentists, small retailers or other verticals have many of the same challenges, threats, opportunities, business practices across different geographies.

Our friends over at IncredibleBank have accomplished this in the RV lending space. The bank both markets and underwrites its luxury motor coach lending business online. Customers are either referred to IncredibleBank by their RV manufacturer or they learn about the bank’s loan options via search engine results. The bank has seen immense success diving deep into this niche.

Though the current commercial lending environment is as challenging as ever, there are opportunities for those lenders who are creative – while maintaining their risk discipline – leverage lending software to be consistent in their decisioning and underwriting, and who develop a deep expertise in certain industries.

Author Bio

Baker Hill empowers progressive financial institutions to increase revenue, reduce risk, and drive more profitable relationships.

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