Have you ever experienced a sales person who constantly tries to push a product or service on you that you do not want? Doesn’t it make you feel like running the other way? My wife sums up sales well when with her saying, “People don’t care how much you know, until they know how much you care.”
I once violated this rule early in my finance career when I primarily did real estate mortgages. I had a realtor bring a buyer to me who wanted a loan to purchase a house. He knew exactly what he wanted, a 3 year adjustable rate mortgage, since the rate was lower and he had another property that would close within the three years so he planned on retiring the debt. I told him about the benefit of a fixed 30 year mortgage, as I could not understand why anyone would want an adjustable rate loan. It just seemed too risky in the event that he could not pay off the loan and if rates shot up.
The guy went to the bank down the street to get the loan to my surprise. When I asked the realtor why, he told me that I did not listen to him and was offering something that he did not want. He then said that I had two ears and one mouth and I should spend more time using the organ I had more of.
We experienced someone really caring in sales with a car dealer. We purchased three vehicles from the same salesman over the past year (I have teenagers at home). This gent asks the right questions and listens. He then finds the vehicle that fits what we want.
So how does this apply to commercial lending? Whether you like it or not, you are in sales. You are never the only game in town as there are others who are vying to become the trusted financial advisor for your client. This involves you asking pertinent questions to learn about the customer’s business and then listening intently with the intent to learn. One thing that is really cool about commercial and ag lending is that you can never cease to learn. If you think you have learned it all, then it’s time to retire.
Active listening requires asking insightful questions that will draw out a thoughtful response from the client. You need answers that are more detailed than “yes” or “no”. The questions also need to be asked in a sincere and non-threatening way. The client can sniff out if you really want to understand his situation just like a hound dog can sniff out a rabbit.
One way to find good questions is to do some research on the industry and the market area. What are overall trends? Then asking what trends the client sees and compare if the industry and the client are experiencing the same things. These questions will differ greatly between various types of businesses.
There are other questions you can ask that can be used universally to engage the client. Asking “what was your biggest successes last year” may shed light on what the owner thinks is most important and what he devotes the most time to. If you have an owner who is really into the financials, he may cite a certain product or division that had the largest profit margin.
A question like “what things keep you up at night” will help you see the biggest concerns the owner may have. If you cannot get a thoughtful response here, you either have an owner who does not trust you to share the information or who ignores any risk that is present in the business. The former requires you to build a stronger relationship, the latter requires you run and avoid the prospect.
Asking “where do you plan to be in 5 years” will help you understand the long term goals of the business. The question of “what are your plans in the next 6-12 months” can give reveal the short term plans. Learning about the history of the business or owners is key in understanding how the firm got to the place they are in today.
One of the worst mistakes is to fail to listen and learn about your customer. If you are suggesting financing options without listening to the client first, you are degrading your professional skills to that of taking an order over the phone. If you get the transaction, you are not getting the relationship as a trusted advisor. This is your goal as a business or farm lender. You want your clients to come to you over and over again, because the owner believes he is better banking with you than he is with anyone else.
True, there are times when you cannot give the customer what he wants since it conflicts with your guidelines or prudent underwriting practices. At those times, it is important to explain why you cannot give him what he wants and if possible, offer an alternative. But listening to the customer is the first step in building the relationship. Otherwise, making suggestions to the business customer on financing options for his business is like throwing ideas against a wall and hoping something sticks. That is an inefficient way to build your portfolio.