Sometimes in banking, the closing of a particular loan or deposit transaction drags on for no other reason than the customer is reluctant to agree to the terms either for spoken or unspoken reasons. At CenterState, we have learned some valuable lessons from other banks that have helped us close more transactions and can help every relationship manager gain more of an advantage to cut down closing times and increase their closing percentage. In this article, we break down these five lessons.
One: Produce a Plan
While every banker has a plan for closing, the problem we have found is the fact that they might be the only one that knows the plan. By producing a closing checklist complete with an expected timeline, several good things happen.
First, and most importantly, it sets expectations and allows the customer to have a clear understanding of the closing processes.
Consider that we have found that landing a profitable commercial banking relationships takes an average of 20 material interactions, five of which come around a specific transaction. Build some of these five interactions in from the start with the timeframe document and your work for setting follow up meetings will be much easier.
A checklist also allows the customer to know what documents are needed and when. The documents serve as another opportunity to show value through service and to put your brand in front of the customer. For the bank, it allows the entire banking team from compliance to operations to know their role and the timing of a material transaction.
Finally, having a transaction closing checklist gives the banker a tool to clearly explain the closing process and then hold the customer accountable for their actions. It provides a document that the banker can go back to and reference, how and why both parties need to move things along as agreed. Further, a checklist and timeline is an excellent training tool to help educate new relationship managers on the closing process.
Two: Use Labels to Promote Tactical Empathy
From a psychological standpoint, labeling allows the banker to name a positive or negative customer feeling so they can use the label to support the good behavior and suppress the negative behavior.
Having a banker say, “It feels like you are hesitating to commit to this loan transaction,” now allows you to explore the reasons for “hesitating.” Without that label, that behavior might have gone unnoticed and unchecked.
Here are two of our most popular empathetic labels - “It seems like you have given this new banking relationship a lot of thought,” serves to reinforce their decision to switch banks making it less likely to hesitate. Or, “Ok, from what you indicated, the timing of closing this loan is important to you.”
In both cases, not only does labeling help us clarify what we are experiencing, but then allows us a “handle” to go back to later in the sales process to move things along. When things are dragging one, a banker can reference, “I am trying to hold us to our stated closing date as you originally said that timing was important to you.” Creating these handles early in the relationship helps us move to a faster close by allowing us to better understand the customer and then use that understanding to keep things moving.
Three: Understand the Cost of Doing Nothing
Every delay in closing cost both the bank and the client money. In addition, it is likely that they are not getting the new service they need or the better rate/terms. It is important to understand what each day cost both parties in order to quantify inaction. For logic driven customers, putting a dollar value in a delay is enough alone to spur motivation. Internally, having a dollar value helps motivate related parties such as loan operations, credit, compliance, and third-parties that may not understand the byproducts of delays.
A negotiating class we took drove home this point that we never forgot and also teach new bankers - “Never be mean to someone who could hurt you by doing nothing.” In any transaction, there are a variety of third-parties that are not motivated by the transaction that is needed to make a closing happen – third-parties, the co-workers of the customer, parents of the property owner, support personnel and similar all fall into this category.
While bankers are rarely mean, the real teaching point is the converse of this point. All tangentially related parties to a transaction can help you in some way if they feel like it. Ordering an appraisal, getting an environmental report, municipal permit validation, legal, internal bank staff, etc. all play a role. Bankers that look to develop the most efficient closing process need to be cognizant of these tangential players and proactively make sure they are emotionally motivated to help you.
Four: Control the Close
Early in our careers, we had a good client that was a real estate developer. His ego was huge, and he would love to put you on hold for ten minutes in the middle of a phone call, start meetings late or interrupt a meeting to take care of other business. His subconscious or conscious action was a power move that always caused delays and served to throw our closing team off balance.
We sought the help of a senior banker that gave us this advice – “He does this to you because you allow him to do it to you. Just walk out or end the call and he will get the message.” We were scared to try it, but Frank, the senior banker, pointed out that customers with big egos want to be with the best bankers and the best bankers value their time and tradecraft.
At that point, we decided to end every call or meeting on our terms. We would do this respectfully, but we would not give up control. Usually, we would leave a message to the effect of, “Sorry we missed you for the meeting, but we waited in the lobby for twenty minutes and then we had to move on to our next closing.” We figured we would have to do this a couple of times to change behavior. We had to do this exactly once. Frank was right. Unless you respect your time and banking capabilities, customers won’t either.
In another instance with a CFO of a small utility, the customer repeatedly put off loan closing and would cancel at the last minute. After the third time, we explained all the effort that went into coordinating a loan closing, and we asked for four days notice if he needed to cancel. He agreed, and we closed on time for each of the 12 major transactions closed thereafter.
Establish mutual respect early in the relationship, and you have a better chance of a smooth transaction close.
Five: Automate the Process to Enhance Communication, Reduce Fraud and Increase Speed
The bank has produced a timeline and has an organized process for closing a banking transaction, so the next step is to keep everyone informed. Using SMS/text alerts, emails or phone calls are all helpful after key meetings and milestones. Each message should confirm the current step and discuss next steps.
Banks should consider leveraging their customer relationship management system (CRM), email automation application and esigning capabilities to move things along. For that matter, there are several third-party applications that are available that can help digitize the bulk of the commercial loan process to include taking an online account application, pulling relevant records (UCCs, title, identification, etc.) and handling workflow.
Take the time to map out your middle and back office process to see where you can save steps and where you can digitize the process to become more efficient.
Putting This into Action
Times are good right now, and it is easy for bankers to think there is no need to improve if they are meeting their goals. Nothing could be farther from the truth as now is the time to prepare for when times are tough, and growth slows.
Further, if your bank isn’t going after quality relationships, then you may not need amazing banking skills as borrowers are just happy to have a bank or a loan. However, now is the time to increase customer quality and these accounts are the ones with many banks knocking on their door. Managing these quality accounts take real banking skill. Understanding some of the above tactics can help make you more efficient and help you win more business in competitive situations.
Create a branded checklist and an example timeline for each product as a tool your bankers can use to close material banking transactions. Practice the art of using labels to change behavior. Train your bankers to understand how to calculate the cost of not closing that loan and deposit both for the bank and for the customer in order to have a quantitative reason to close sooner rather than later. Work on controlling your close while streamlining your closing process and your bank should be able to decrease the time it takes to close transactions and increase the percentages of transactions that close on time.
Submitted by Chris Nichols on July 09, 2018