Find a banker who knows your industry niche

When it comes to business financing, today’s climate remains chilly. Thawing Colorado industry requires more than layering on a fleece jacket — it’s a matter of training and preparation to achieve a business’ personal best.

This issue is timely: In September, Congress passed a small-business jobs bill. Intended to enhance the operating climate for many small businesses, the bill aimed to help community banks leverage their assets for small-business lending.

But some banks reported they do not need the new incentives, because risk-averse customers are playing “wait and see” before investing in growth. In fact, in a September report from the National Federation of Independent Business, 91 percent of small-business respondents said all their credit needs were met. Only 4 percent said financing is their top business problem.

Despite rumors to the contrary, banks continue to lend money. Credit is most readily available to companies that have a solid business plan that takes into account best- and worst-case scenarios.

For companies in that position that are seeking to improve sales and generate future expansion, niche banking, or banking services designed to fit a specific industry, can help. Niche bankers leverage strong background knowledge to help businesses do what they do best.

From passion to profit

This article uses the outdoor products industry — my specialty — as an example of how niche banking benefits companies. The “recreation economy,” which includes the outdoor products industry, generates approximately 4 percent of Colorado’s gross product, according to the Boulder-based Outdoor Industry Association, or about $8 billion annually.

As Coloradans, we live and breathe outdoor recreation in our work and our play. But as with any bank’s true specialty services, outdoor-products banking goes beyond passion for the industry. True niche banking depends on deep understanding of a company’s needs to help secure the right financing products and services to succeed.

When you seek a niche banker, ask these five questions to be sure the banker really understands your challenges:

• Does the banker truly know your sales cycle? In seasonally driven industries, sales cycles have their own rhythm. Design and manufacturing might happen months or years in advance of product hitting catalogs and shelves. If your business has high seasonality, or a long preplanning/design cycle to product delivery, is your banker familiar and comfortable with that cycle?

• Do the bank’s services fit your production and shipping cycles? Almost universally, manufacturing takes place overseas. Wherever your factories are, a good niche banker will understand what you need to work with international partners. This expertise should lead to advice on foreign currency exchange options. It also should help you manage letters of credit and arrange financing to keep things moving smoothly between factories and stateside distribution.

• Can the bank help with cash flow needs? Product on shelves today was designed almost a year ago. Multiseason manufacturers have multiple design and production cycles. Once inventory is delivered, customers typically fulfill invoices in 30 to 60 days — although invoice days have been slipping to 90 days due to the economic slowdown. During the entire business cycle, the manufacturer must resolve cash flow needs, whether through well-managed cash reserves or a line of credit. Does the banker have experience crafting letters of credit and working on trade finance?

• Does the banker have a keen eye for business development? Newer companies are less likely to have established relationships with factories — the relationships that create flexible payment terms. Newer businesses face demands in terms of up-front payments for materials and shipping costs. An experienced banker can evaluate the stages of business to adequately assess investment risks and help secure appropriate financing.

• Is the banker personally involved in your industry? Personal involvement equals personal investment. If your business is homebuilding, you’ll want to know your banker has donned a hard hat. In outdoor goods, if the banker hits the slopes or the triathlon circuit, it’s a good clue that he or she personally understands industry trends and how the market perceives your products.

Colorado has a fairly high concentration of niche companies. Some are extremely successful, with C-level officers who are masters of their special financing needs. Smaller companies may not realize that the lending they need is best served by a specialist.

Whatever your niche, before you leap into a banking relationship, by ensuring that your banker understands your needs beyond a simple line of credit, you’ll set up your business to scale the heights of success.

Gary Gomulinski is vice president of commercial banking for Vectra Bank Colorado in Boulder. The bank’s Web address is www.vectrabank.com.

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