Relationship Banking 101

As a business owner, you know the value of having a good relationship with your customers. It's not always about pure transactions but instead the trust and loyalty you build.

The same should hold true with your financial institution. Your bank can offer far more than business loans and checking accounts. Here's how having a more personal relationship can benefit your business in the long run.

What is relationship banking?

Relationship banking is a concept that moves beyond transactional banking into something more. It's when a bank really gets to know their business customers—including their needs and concerns—and works together with clients to come up with solutions and services that make financial sense.

Relationship banking succeeds when it focuses on the individual. When you work with a bank that has this type of culture, it's like having your own private banker dedicated to your business.

Whether you're starting a business or growing, it means something to have a business banker in your corner ready to help navigate your financial needs. When you feel confident that your bank is dependable, trustworthy and prepared to proactively help your business, it can give you peace of mind that you've found the right partner.

Benefits of relationship banking

Relationship banking is exactly what it sounds like—an individual or business owner building a trusted, long-term relationship with their banking institution, usually directly through a specific banker or account officer.

Services and solutions

This high-touch personal service gives you access to comprehensive solutions your bank offers. This might include loans, lines of credit, business credit cards to manage and track spending, insurance and safety deposit boxes. Your bank might also provide business services like payroll process and automatic payments or international services like letters of credit.

Strategic advice

Relationship banking also includes strategic advice from an experienced banker with a vested interest in seeing your business meet its goals.

For example, if you run a seasonal business or experience inventory fluctuations, your relationship banker can offer tools and strategies for managing cash flow during these cyclical variations. By getting to know your businesses and accounts, your banker can become a trusted partner who can make recommendations on products and services.

Goal setting and investments

Your relationship banker can help you think proactively about reaching your longer-term goals. If you're planning to expand internationally, they can identify key investments to make and partnerships to form in the months leading up to the expansion.

Transition planning

Your relationship banker can work also with you on a strategy for exiting or transitioning your business to a family member when the time comes.

Wealth management

If you need help managing personal wealth, your business banker can pair you with your bank's wealth management division to make sure the two strategies align.

A bank's center of influence

Banks embedded in the local community can often help you build relationships with other businesses, community organizations and even potential customers. Banks are experts in the local economy and have connections throughout the entire community.

As your company grows, your banking needs will grow as well. Having a relationship banker as an ally may help save you money through lower fees on bank products such as checking accounts or credit cards. Their insight may also help you consolidate redundant accounts.

A relationship banker will also get to know the details of your business. This way, they can advocate for you when you seek a loan—helping you calculate whether to apply for a business loan or line of credit—as well as find better rates or more favorable terms.

Relationship versus transactional banking

At the opposite end of the spectrum, transactional banking focuses on services offered to customers—including business checking and savings accounts—and getting them to use as many of these services as possible.

Both types of banking hope to create efficiencies that improve customers' lives. You might see this in the form of online banking and apps. But where transactional banking provides these tools, sets you up with services and leaves you to figure out the rest, relationship banking proactively helps you get the most out of these offerings.

As your business grows, you might need loans or other financial tools to function. Having a bank that understands your business and is willing to offer more flexibility can provide a massive boost during critical times.

This is the primary benefit of relationship banking. Your banker becomes a financial strategist who can tailor packages of products and services to your needs, provide flexible rates and credit approvals, and help you meet your business objectives.

Because transactional banks rely on online forms or complex algorithms to provide answers on loans or other applications, they don't always offer this type of flexibility. This can hamper the long-term potential of your business.

Assess your banking needs

Fortunately, your banking situation doesn't have to be an all-or-nothing choice. If you're currently working with a bank that feels more transactional, you can make an effort to get to know your banker. Schedule a time to meet with them in person to let them know about your business and some of your needs. It could be enough to start moving the relationship toward something more personal.

Building a banking relationship

Like all good relationships, building a banking partnership takes time. It typically starts with opening an account, but this is just the beginning of what a relationship banker can offer.

Be proactive and seek out your banker's advice every step of the way. Ask them about the products and services they offer and how they align with your business and financial plans. Be open and transparent with all details of your business, and schedule regular sessions to discuss short- and long-term goals.

The best way to leverage relationship banking benefits is to provide a complete picture of your business—including any challenges you're facing—so you can best determine how your financial institution can help meet them.