For Steps to More Profitable and Higher Quality Loans
We've seen easier times. Remember when loan requests just walked through the door? That was nice while it happened, but you may not want to hold your breath waiting for the "good old days" to return.
This is the new "normal."
It's time for different mindsets and skill sets, because banks that "get it" are taking market share from the others at a record-breaking pace. While many banks are filled with lenders complaining that customers are hard to find, there's a new breed of banker that's making hay. They know what to do, and they're doing it right now. Here are five steps you can start today to attract high quality loans and get them to bring all their business:
Step One: Narrow your market.
That's right. You want FEWER prospects, not more.
First, identify your targets. Specifically. Clearly. Research your most profitable customers to find what psychographics they have in common, then find everyone who is just like them. Knowing who they are and their parallel markets is critical.
Let's say you study the 20 most profitable commercial loans and discover that four of them are dentists. That's helpful. Now you know you must find all the dentists in your area and get them on your list. Additionally, you can begin to find other parallel markets such as private practice podiatrists, dermatologists, or other medical practitioners.
You want to find a school of hungry fish and create a feeding frenzy in those markets.
The key to identifying your markets is to make sure that they are narrowly defined. "Manufacturing firms" isn't a great target. Too broad. If you narrow it by saying "manufacturing CEOs and CFOs doing $4 to $20 million in revenue in the health industry"…now THAT is a defined market. From there, you can find your parallel markets.
Step Two: Warm that market.
One of the most violated marketing rules in banking is "never try to sell product directly B to B." In other words, schlep your wares as a first introduction and prospects get nervous and want you to go away. If they do let you stay, they'll want you to negotiate pricing. Neither option is any good.
Instead, you want to start the relationship by being seen as an expert offering extremely valuable advice. Sounds good. How do you do that?
You start by being the ongoing source of information targeted to their needs. Send articles on how to protect their business from identify theft. Send invitations to teleseminars on how to create a great culture in their workplace. Send invitations for seminars on how to hire better, plan cash flow, put controls into their business, you name it. If it speaks to a solution for a problem they have and you offer that solution with no strings—you are about to get yourself a new customer.
But don't go there yet. It's essential that you offer that information WITHOUT promoting yourself. No, your cold medication isn't causing temporary insanity. You heard that right. You MUST provide information without promoting yourself. It's about the RELATIONSHIP.
How can you possibly get to the point where they trust you with all their business and don't ask you to negotiate pricing if you jump the gun with an impatient request to do business? Can you say bada bing, bada boom?
Sending them invitations to valuable seminars and teleseminars, relevant articles, special reports, and all the rest, positions you as a great organization that is committed to helping them.
By the time you have offered the fourth or fifth piece of information for free, they're getting rather perturbed with their incumbent bank and are considering displacement.
This is right where you want them, because you're just about to…
Step Three: Offer them a way to show their appreciation.
After several kind offers sent out on a systematic basis, you offer a "bounce back"—that beautiful opportunity for them to raise their hand saying they are interested in something…anything. But you STILL don't mention you have a product. At this point, you MAY have to put duct tape over your mouth.
What you've just done is provided them the opportunity to say, "Hey, I'm noticing you and I'm liking what I see. Maybe we should talk sometime."
The crafting of that bounce back is critical. Every detail matters. It must be simple, easy to respond to, and speak to more FREE information…not products or services. I
KNOW you think this won't work...until it does. And that leads to…
Step Four: Since they're begging, SURE you can find some time to talk!
Within a few hours of the bounce back coming in, seize the moment and give them a call. But make sure to…
Step Five: Follow a sales process that assures you will close over 90 percent of qualified prospects without ever matching rate.
Yep. Really. I know you don't believe it. But lenders who don't know how to do this can't close more than 30 percent, and they're constantly matching rates.
But there is a new breed of banker that is doing it over and over again with great success, and they'll be thrilled to take away your business while you polish your "story" of why it can't be done!
After all of this time and effort, don't blow it now. If every one of your commercial lenders doesn't know how to follow a sales process that gets your prospects to verbally "commit" to do a deal at fair pricing BEFORE you do any work presenting a plan, or worst of all, taking it all the way to loan committee to waste those nice people's time—you have a behemoth of a bottleneck. You may want to prepare your board for the announcement of squeezed net interest margin and unnecessary loan risk.
Lenders sometimes get themselves into the position where they say those ugly, hideous words, "We can do this deal IF we match the rates," you KNOW you have a lender that's costing you your profits. You have an education issue and a mindset issue that must be rectified at once.
By following these five steps, banks that hadn't grown more than 4-5 percent a year suddenly find themselves growing their loan portfolio 10 to 25 percent within a year while improving loan quality and improving fees and pricing. If they can do it, you can do it. You simply have to shore up your knowledge gap. You can do that.