Ken Gates has been in banking, private equity and equipment finance since 1987. He joined the equipment finance group at Frost Bank five-and-a-half years ago and was recently promoted to president.
Have you ever been asked the question “why do I need you” by your banking colleagues? It’s an indicator of how young the equipment finance line of business is in many regional banks. It also serves as a reminder that it is part of our job as good sales people to explain our value, not just to prospects and customers, but to our own teammates on the banking side.
“Why do I need you?”
The wording may be different each time the question is asked, but it translates to a clear request for an explanation of value. That the question is being asked by our banking colleagues is an indicator of how young the equipment finance line of business is in many regional banks like ours. It also serves as a reminder that it is part of our job as good sales people to explain our value not just to prospects and customers, but to our own teammates on the banking side.
Although large banks have had equipment finance specialists for years, most regional banks didn’t recognize the opportunity until the last decade or so. The trend accelerated after 2008 when the Federal Reserve implemented its quantitative easing program, and banks found themselves flush with cash from depositors who were seeking stability. Equipment financing was another way to put the cash to good use.
Banks have approached the equipment finance business in several basic ways. The larger banks have mostly taken the “silo” approach, as a free-standing line of business with its own underwriting and sales teams. Many regionals, like ours, have decided that integrating the equipment finance group into the banking sales teams allows us to enhance long-standing customer relationships and leverage limited resources by working closely with the bankers.
Even so, we regularly get the question of “Why do I need you?” or “Why would I do a lease instead of a loan?” It is a sincere and fair question.
Here are a few of the ways that we have learned to answer that question:
A Lease is Not a Lost Loan
Our group was founded at Frost Bank in 2001 by industry veteran Harry Kaplun and is a relative newcomer to our 150-year-old bank. We are fortunate at Frost because the cultural expectation, explicitly articulated by senior management, is that all of our lines of business will work closely together. What that means is that our primary referral source for a relationship is usually the banker who “owns” the relationship.
Our group benefits from an incentive structure that aligns the banker’s self-interest with that of the equipment finance sales person. Like many banks, we track our activity with “shadow” accounting but give the banker full credit for a closed lease just as if he or she had closed a loan.
Clearly Explain Your Value
Each of our sales people has become adept in explaining our value proposition both inside and outside the bank. How we express that value is adapted to the audience, so it may be different as we move from banker to banker. One of my recent favorites came from a sales person who joined our team from another line of business four years ago: “The mess stops at my desk.”
In our model, we make the sales pitch and present a clear financing proposal but hand off underwriting to the banker. Once the banker has completed the underwriting and approved the request, we take it from there by gathering invoices, handling valuation, getting proof of insurance, chasing vehicle titles and equipment serial numbers, preparing accurate lease documents, and circulating them for signatures and paying the vendor. After the request is approved, the banker moves on to find the next opportunity while our team handles the details of closing the transaction. Particularly for larger and more complex transactions, a smoothly coordinated sales effort followed by an efficient and error-free closing is the best way to prove our value.
Also, we are another tool for developing and protecting the bank’s relationships. Cameron Pittman, who is managing director of Direct Equipment Finance at Bank of the West, likes to point out that equipment finance is both an offensive and defensive product. We give the bankers another way to connect with a prospect and a defense against competitors who want to find an entry point into our customer relationships.
Be Available and Responsive
We have made a commitment as an institution to use Salesforce to coordinate our efforts, and our team uses it to watch for opportunities as they appear and get involved in the first conversation with the prospect about equipment. One of the biggest challenges is to be included in that first discussion about equipment. A banker who tries to wing it with an explanation of a product that he or she does not fully understand can put our equipment finance sales person in an awkward position, particularly because another one of our cultural values is that we do what we say. It’s tough to show up after the fact and try to unwind the misstatements without damaging your relationship with the banker or impairing the prospect’s view of your team’s competence.
Also, availability means that when space planning allows, we try to locate our sales person in the middle of the bankers so that we have a lot of incidental contact and relationship building. That leads to the most critical element.
If your bankers don’t value and protect their customers, you have the wrong bankers. However, that protectiveness can sometimes lead to the exclusion of other team members. When that possessiveness is fed by an unhealthy level of fear and distrust, it is almost impossible to overcome. Fortunately, most of our bankers simply want to know that we will treat their hard-won customer with the same care and respect that they do. They want to know that they can trust us, which is the most important element of our relationship with them.
Trust is difficult to earn and easy to lose. Our bank’s mission statement begins with the phrase, “We will build long term relationships…” Here are some of the ways that we build trust with our bankers:
Start building the relationship early. Shortly after a future banker is hired at Frost, one of us makes contact informally, through a lunch and learn or in the equipment finance class that is part of the bank’s training program.
Be competent and do what you say. We hold ourselves responsible to be the experts on equipment finance and serve as a trusted advisor to the banker, and we have to deliver on that expertise when we make commitments.
We demonstrate respect by interacting with the customer in a way that works for both the banker and the client. Ideally, the banker will step aside and allow us to interact directly with the customer, but some want to manage the relationship more directly and we respect that by communicating through the banker.
Make sure the customer and banker have a good experience.
Be honest about whether your product is the right choice. Sometimes, the financing need does not fit in our box. Our veteran sales people recognize early when a financing request is a not a good fit to avoid damaging the relationship with a poor quality experience.
Be generous with your expertise and resources. Even when it is clear that the right product isn’t one that is sold by our group, we fill that trusted advisor role for the bankers to provide the guidance they need to book a safe loan.
The other question that we get regularly is “Can you help me?” Each one of those requests is a small victory, because it is tangible proof that we have explained our value, made ourselves available, and, most importantly, built a relationship of trust. •
It happens all the time. You finance a customer’s acquisition of equipment and the customer subleases the equipment. While there is nothing inherently wrong with such arrangements, several potential issues arise which, if not carefully addressed, could expose a finance... read more
Throughout the past five years, several organizations have published multiple studies attempting to quantify the impact of various levels of corporate diversity on increased shareholder value, customer satisfaction and employee engagement, otherwise known as the “Big Three.” “Why Diversity Matters,”... read more