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Lessons From the Front Line: The Value of Relationships

April 16, 2014, 07:00 AM

The ability to build and maintain relationships is the keystone of all successful businesses. Human connectivity on multiple levels wins the business, and is a critical factor in keeping it over the long-term. This is a soft and subjective area – cultivating mutual trust in an ever-changing market environment that will bring both good and bad to the relationship over time. In the lending business, “character” is a major component in decision-making even though there are no quantitative facts to support what we feel about the owners and managers of our clients. For the lender – “Is the owner reliable and forthcoming? Is the team seasoned and seem like they work together and communicate well?” From the borrower’s perspective, is the lender forthcoming – “Will he follow through on what he says, and will he support the business throughout the cycle?”

As we educate the next generation of lenders, how do we teach the relationship-building skill? This is more a matter of “show” than “tell.” It starts with a conscious recognition on the part of the manager that it is imperative to include the team members identified as future Relationship Managers or Business Development Officers in every client-facing point of contact throughout the sales process and lending relationship. The way to learn is to watch, and to connect actions with consequences over time.

From the initial sales call, throughout the negotiation process, underwriting, approval, documentation, closing, and in managing the account over time, trainees should attend external and internal meetings and calls to observe, first-hand, how a deal is put together and managed. Given that the product – money – is the same in any institution, excellent service, and connecting the prospect to the team that will manage the relationship is critical in the competitive process.

The art to winning a deal is positioning the bank as the best possible provider of capital, staffed by professionals with the clear goal of supporting the borrower during the best and the worst of times. Successful negotiations develop a “win-win” outcome. The borrower-lender relationship starts with the belief that open communication and practical problem-solving on both sides of the table will result in mutual respect, trust and benefit.

A manager should take the time to do a “post-mortem” with the newer members of the deal team on new business transactions – identify the forces driving the business, discuss competition and how to differentiate, connect internal credit standards with client need, and imagine scenarios which equilibrate what the client believes will happen with a more realistic view. Over time, discuss the outcomes of decisions made.

Not all relationships work out over time. Managers should expose younger, high potential team members to poor outcomes – bankruptcy, fraud, workouts – in order to draw distinctions in borrower behavior and the impact of fickle market forces on business. Some of the most memorable lessons in the “how-to” of relationship building occur when these fail.

Troubled times for a borrower provide managers with an important opportunity to demonstrate how to handle difficulties in and open and productive way. There is an art to communicating bad news – developing this skill is critical for lenders to manage through a declining situation with a borrower. This starts with a practical assessment of the situation and an open conversation about how to move forward. A sense of urgency is critical, but panic is destructive. When a lender’s course of action is set, this must be communicated with confidence, and confirmation that the best possible outcome will benefit both parties.

Over time, and throughout the relationship, managers should emphasize that the most important personal qualities in a lender are subjective: integrity and credibility. These provide the foundation for the successful relationship. This breaks down, simply, into listening to the borrower, doing what you say you will do, and delivering difficult news on time and with potential solutions to the problems. Open communication, flexibility and practical problem-solving capabilities, particularly during a period of declining trends, will reinforce credibility and integrity on both sides, leading to an optimum result.

In training the next generation of commercial lenders, it is critical to confirm the essential humanity of all the people involved in the give and take of a successful lender-borrower relationship. Understanding, empathy, and the ability to forge connections with the borrower will enable the lender to meet the challenges of the market, and how the borrower responds, to build a long-term productive relationship. The only way to convey this skill-set is hands-on experience over time, with team members who have, in addition to technical competency, these subjective qualities, and have learned to apply them.

Kathleen Z. Lepak
Asset Based Lending Business Director, SVP Market Manager | People’s United Business Capital
Kate Lepak has been an asset-based lending professional for her entire 30+ year career, holding sales management and executive positions with Wells Fargo Business Credit, GE Capital and Citigroup. She has completed restructures, turnarounds and startups for the ABL units of these Fortune 500 companies. Kate has also assisted in a capital raise and re-launch of an independent commercial finance company in the Northeast.

Kate currently serves as the ABL Business Director for People’s United Business Capital, managing portfolio, underwriting, and business strategy.

Kate has held Board positions with the Turnaround Management Association and the Commercial Finance Association. Currently, she is a member of the Executive Committee at the CFA. Additionally, she has contributed numerous articles to trade association publications, and has appeared on industry-related panels and speaking engagements. Kate holds a BA degree from the University of Connecticut, and an MA degree from Trinity College in Hartford, CT.
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