A banker switches seats with farmers
FOR 32 YEARS, ROB Hall worked in agricultural banking in Ontario - sometimes at the very top of the food chain, and always on the management side of the desk. Now, he’s switched sides. He’s on the farmer’s side. And he’s eager to talk in plain language.
In February, Hall launched BankSpeak (www.bankspeak.ca), a business finance consultancy he runs out of his home office in Waterloo. His mission is to help farmers and other business people decipher the words and terms that come out of bankers’ mouths – such as AML, non-recourse and balloon payment. Their meanings are not always obvious, but they’re vital for business transactions.
So far, his clientele is a 50/50 farm/non-farm mix. On the farm side, among those he’s worked with are producers grappling with the complexities (finances, restructuring debt, etc.) of buying out partners, and others who had financed their equipment with too short of a payback. He charges hourly for his services, rather than altering it depending on the size of the transaction involved.
Hall’s keeping his eye on trends, especially those being driven by cheap money. One of the trends he’s seeing is the growing practice by traditional banks to reposition clients with smaller portfolios – around $100,000 – from commercial to small business. That’s resulting in more clients being considered small business ... but the banks aren’t adding any additional support staff to manage the newly repositioned accounts.
“It’s a high-volume, lowmargin situation,” says Hall.
For his part, Hall is open to sharing with producers what he’s learned from his three decades of working with them. Here are some banking tips
1) Interest rates and fees are not set in stone.
Sure, a bank has interest rate guidelines. But, after staff put all of your ratios and financial information into various computer programs, at the end of everything, a bank will try to get as much interest as possible. Hall says negotiate, based on your other business with your bank, the longevity of time you have dealt with them, and competitive pressure.
2) Banks don’t always need – nor do they read – all of the information they ask for.
Some banks feel that more paper and reporting makes a transaction a stronger deal. But more reporting sometimes allows a bank to justify a higher monthly fee, he says, even if they are not actually reviewing what they’re supposed to be reporting on.
3) Your relationship is with your local representative, not your bank.
You may think that you have a relationship with your bank. Not true, says Hall. You have a relationship with your contact there, only. Beyond the branch, you are simply another account.
4) Personalities play a big part in banking.
All business transactions should be based on sound review and impartiality. But sometimes the bank rep’s personality can get in the way of a good deal. Be sure you feel confident the rep is prepared to put the work required into a deal and fully understands it.
5) A negative note on your file is hard to delete.
When a written comment is made on your file by a person at a high level, even if it is blatantly wrong, it will taint your file. It’s hard to remove. And if the boss made the mistake, no one wants to be the person who corrects the boss. 6) Errors happen. Read all your documents carefully, especially if they are from a smaller lender and they are produced from a word processor rather than a stock document. Errors frequently occur, and they can affect your legal position on such things as penalties.
Take it from Hall. When it comes to farm finance, he’s been there – and done that.