We are interested in gathering competitive proposals for our banking relationship including line of credit, payroll and all daily transaction accounts. We are a mid-sized company of about $200M in annual revenue; our size and transaction volumes make us inclined to focus on national banks with robust services. We have been in our current relationship for 12 years and find it's time for a competitive review. I am interested in best practices you could share as we go through this process - RFP questions, ideas on negotiating terms, or etc. Thanks in advance for your help.
RFP for comprehensive banking relationship
Answers
Given your size and needs, I would make sure to include at least 2 large regional banks in your RFP. Being a larger fish in a smaller pond has its advantages. It is also a good idea to ask specifically about implementation costs for the line of credit and the
Price is only the beginning when considering a change in relationships
When changing relationships you should be looking for a bank that can give you the "best" performance that supports your business objectives. You maybe able to find a lower price for a fed wire, but a fed wire will always be more expensive than an ACH.
Your RFP should focus on the services you need for the future which, in turn, may require internal operational changes. The cost of these internal changes should be ocnsidered when reviewing any banks RFP response. (e.g. vendors would like to be paid electronically and will give you better terms if you do so, hence the need for ACHs)
In considering a relationship change you should talk with your current bank. You may find them more accommodating if they understand the reasons for the change and what you seek in the future. Also, including regional banks as suggested by others is a good idea. You will probably receive better service. Caveat: if your needs are international a regional bank maynot be best.
Finally, bidding out your credit needs is completely different than bidding out your operational needs. The classic service RFP will not do when it comes time for a bank to evaluate their credit
Last point - consider that whatever bank you speak to will want both credit and cash management in any relationship. The ugly secret is that most banks do not make a lot of money on loans on a risk adjusted basis. With new capital rules in place lending is a low margin business. As a result they make it up on services so your "best" deal maybe to award both to one bank IF they have the performance you need for the future.
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Cash Management