There is a trendy restaurant in New York City that temporarily changed its menu to serve food composed entirely of garbage. The idea was to highlight the amount of food that is wasted worldwide. Food waste happens for different reasons in different places – in developing countries, difficulty with storage and refrigeration are the problem. In developed countries, aesthetic standards are the primary culprit, and changing this perception was the goal of the experiment.
In our previous blog (HERE), we considered the structure of commercial loan documentation and important objectives of certain agreements. We also discussed common loan concepts that are of particular importance to commercial lenders. Today, we cover some of the important provisions of the loan documents and explain some of the important considerations when definitive loan agreements are negotiated. Effective lenders must strike the right balance between protecting the bank and creating a workable document for the cust
We understand that there is a fine line between spam and marketing. However, banks dramatically underutilize email marketing to drive business. We highlighted a case study not too long ago where a couple simple reminders can help boost deposit balances and improve profitability.
A couple weeks ago, we covered 3 of the best, and most underutilized commercial lending prospecting tools (HERE). Due to multiple requests, we build on that today and show lenders and business development officers how to derive contact information out of thin air. As we pointed out, the art and science of commercial banking sales isn’t taught by traditional education and is largely ignored in banking schools, conferences and training programs.
Readers of this column know that we are big experimenters with artificial intelligence. We use it to set strategy (trying to figure out what really drives bank performance), use it in our loan pricing model (to offer suggestions of improvement) and to assist in credit analysis. We have also experimented with “smart systems” in a number of areas including compliance, HR, credit analysis, writing Suspicious Activity Reports and even writing this column (and you never even knew). Some of these applications are amazingly ready for prime time while others have a ways to go.
One difference between a great commercial lender and an average commercial lender is the understanding of loan documents and insightful knowledge of key terms found in loan documents. In this first part, of two, we will consider the structure of common commercial loan documentation and some finer points about working with these agreements and terms.
Borrower’s and Lender’s Objectives
Last week, Chase joined the ranks of Capital One, USAA, Frost Bank, OneWest, Huntington, Northern Trust and others and announced that in August, the Bank will no longer charge for overdraft transfers on its retail or small business accounts. In addition to eliminating the $10 transfer fee charge, Chase will also not allow customers to draw on their credit card line to fund overdrafts and will thus limit transfers from savings and established lines of credit. Why are these banks doing this and is this a trend?
Lenders typically are thrilled when they bring new customers to the bank. However, some of your most profitable customers are already at the bank. Bankers are often surprised that, all else being equal (credit quality, loan and deposit size, etc.), existing relationships are more profitable than new relationships. While part of most lenders’ responsibilities is business development, retaining and enhancing existing accounts is the most important and efficient way to boost your portfolio’s return on assets.
“In our bank, a customer can go meet with our CEO.” You said it a thousand times and probably heard it from other banks a thousand more. If this is your core principal around service, then it will be tough to sustain as you will find a planned obsolesces when your growth or complexity gets big enough to prevent that customer-to-CEO interaction. We used to talk about CEO access at CenterState until we got larger.
At a recent banking conference, we conducted a poll that asked how many banks want to be more innovative. About 85% of the hands shot up. We then asked, “How many bankers have the culture to experiment, an initiative to innovate, time to innovate and a budget?” Almost every hand dropped. And, there it is – The reason why banks don’t innovate isn’t because they don’t want to, but because it has not risen to a level of importance to warrant a formal initiative. This is the “Innovation Dilemma” in banking – Bankers want to innovate, but are not sure how.
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