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New Services Can Give Control to Borrower

August 09, 2000|Juan Hovey

Do you find it frustrating to do business with your bank? Do you roll your eyes every time a new loan officer knocks on your door promising personal service if you will take the time to educate him or her about your business?

Believe it or not, the banking industry shares your frustration, and it has good news and bad news for you.

The good news is that, in their eagerness to court the small and mid-size businesses, banks and other lenders now offer a wide variety of automated products and services that allow you to control the financial underpinnings of your business in ways heretofore open only to large corporations.

The bad news is that none of these products and services has anything to do with the one thing business owners most want from their lenders--loans. If you need a business loan, you must still look a lender in the eye, and the wonders of the electronic age don't offer you much help.

The products and services now offered by banks and non-bank lenders really do allow you to control your business finances in important ways--indeed, in ways that can improve your bottom line.

Take, for example, the lockbox services now offered by Bank of America, Comerica, Wells Fargo and a number of others. The services allow you to collect payments from your customers at points strategically located near your customers instead of at your offices. If you have customers in, say, Atlanta, you can collect and process payments from them via a bank-operated lockbox in or near that city, saving yourself mail time, not to mention the "float" time it takes to turn those payments into cash in your business account.

Similarly, many lenders target importers and exporters with services designed to speed and simplify the complexities of foreign trade. For example, a Web-based service offered by Comerica and TradeCard Inc., an online trade transaction settlement company, handles purchase orders, invoices and even packing lists online, cutting the time it takes to do business with overseas suppliers and customers.

Most banks offer electronic bill-paying services, which cut the time and costs involved in preparing and mailing checks for such items as rent and utilities. Coming next will be electronic invoicing and bill-presentment services designed to cut costs on the accounts-receivable side.

A number offer automated payroll and direct-deposit services, shaving the time and expense involved in paying your employees. For that matter, banks can send your withholding and quarterly tax payments to the federal and state governments automatically, and their electronic sweep-account services allow you to earn money-market interest on funds sitting idle in your business checking account.

For the business owner with multiple locations--say, the owner of a restaurant chain--banks now offer centralized deposit services, making it easier to keep track of receipts and to match income with outgo.

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As you can see, none of these services targets the need of the business borrower; to get a business loan, you must still spend time with a loan officer. On the plus side, those who plan ahead find many lenders willing to commit to an equipment-purchase loan or lease well in advance of the actual need. Some do the same for real estate transactions.

A number of banks give their loan officers authority to commit to business loans of substantial size in the field, often without sending the application to a loan committee. Wells Fargo gives its loan officers authority to approve loans from $250,000 to $2.5 million in the field; the bank also allows business owners to keep working-capital loans up to $150,000 in force automatically, without having to reapply. Bank of America is pilot-testing a small-business banking group focusing exclusively on the needs of businesses with less than $10 million in revenue.

The Internet, incidentally, improves matters for the business borrower, though only marginally. You can get a business loan of modest size via a handful of Web sites, including LiveCapital.com (http://www.livecapital.com); BusinessFinance.com (http://www.businessfinance.com); the Business Finance Mart (http://www.bizfinance.com); and Capital.com (http://www.capital.com).

At some point bricks-and-mortar banks will follow suit, but until that happens, it remains a difficult process to get a business loan--and you will find yourself dealing with new loan officers more often than you wish.

Why? Lenders pay their loan officers commissions because the strategy gets loans on the books at low cost--even though it also turns loan officers into job-hoppers and makes it difficult for the business owner to build and maintain a good relationship with the lender. The practice isn't likely to change soon.

Says Todd Hollanders, senior vice president and business-banking division manager for Wells Fargo in Los Angeles:

"Technology allows the business owner to develop a different relationship with a bank. It allows you to be your own banker in many ways. It also allows the bank to develop institutional intelligence, so we don't lose memory of what we do."

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Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.

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