Taking Character to the Bank

Security Sales & Integration

The Big Idea with Ron Davis
November, 2015

Taking Character to the Bank

Mark MelendesIf you had just one really great idea you could share with the alarm industry, what would it be?

This month we feature Mark Melendes, Managing Director, Security Industry, The Private Bank

When you come into the banking business, the first thing they teach you as a young broker are the four C’s: Character, Capacity, Capital and Condition. Those are four pretty good criteria for establishing relationships.

MARK MELENDES IS MANAGING DIRECTOR of the security industry financing division of The Private Bank in Chicago, which serves a good segment of the alarm industry. I initially was impressed by Melendes because of a massive weight loss program that he embarked upon, and at which he succeeded (something that I’ve not been able to emulate). He even ran marathons!
I recently met Melendes at a conference in Colorado Springs, CO, and asked him, if he had just one really great idea on how alarm dealers could better interface with the financial community, what would it be? He thought for a minute, and then replied, “When you come into the banking business, the first thing they teach you as a young brokers are the four C’s: Character, Capacity, Capital and Conditions. Those are four pretty good criteria for establishing relationships between any two people, much less a banker and a bank customer.”
Of course, Character refers to the basic honesty and integrity of the person looking to establish a relationship with a banker. It’s something that is easily seen, and is pretty hard to fake. it’s interesting, that’s the first criteria a banker has when evaluating a potential customer. Next is Capacity, or the ability of the potential customer to repay loans (at the end of the day, any banking relationship pretty much has to include a financial borrowing base), considering the wherewithal and means to repay any money that may be owed to the bank as a result of debts incurred by the borrower. I’m reminded that typically, but not always, a banker is not a venture capitalist. They do not invest in companies, they do not look for dividends; they look for repayment of debts. Capital is money available to service any debts. And Conditions refers to the market, the financial community and the local banking community.
Melendes went on to say that the most important C is the one for Character. It’s very hard to develop a strong relationship with an individual who simply does not have the character to repay debts. Remember, while financial transaction done in the banking industry are always predicated on the ability to pay back debt, there is a lot of subjectivity on who qualifies for what.
So when meeting with a banker, particularly for the first time, it’s important for the new customer to be on his best behavior. First impressions are made and are hard to forget. As Melendes notes, it’s important not to brag. It’s important that you are honest about your capactiy to repay loans. And it’s important to be open and forthcoming. All of these points from Melendes relate to integrity.
If you’re an alarm dealer and your’e looking to establish a relationship with a bank, here’s some advice:
  • Seek out an official in the bank at the highest level of someone who can help you. A bank president may be able to help you but generally you’re going to be dealing with a relationship officer far more frequently than the bank president.
  • For a first meeting (and probably all those that follow), dress to impress. Look the part of a person with whom you’d like to work, and with whom you would loan money.
  • Listen more than talk. Answer questions concisely and honestly; don’t exaggerate. If you don’t know the answer to a question, tell the person across the desk what you do know, and what you don’t know.
  • Don’t be quick to make a deal.
  • Thank the bank officer for his or her time. Let that person know how impressed you were with the bank, the services offered, the locations that will be convenient to you, etc.
Typically, bankers are just like any other people; they dress like us, they want approval from us, they want respect from us. They will do business with people who respond to them in this manner. However, they are also looking for capactiy. Make sure you don’t ask for anything more than what your position and business operations can afford to be repaid.

Did I say bankers were not investors? They are not venture capitalists. But they are lenders, and properly positioned, they can help your business grow dramatically. Show them the respect they deserve, and only ask for for those things that you feel comfortable in being able to repay.

Ron DavisRon Davis is Security Sales & Integration‘s “What’s the Big Idea?” columnist and contributing market analyst. He is president of Davis Group, a full-service consulting firm serving the security industry, which also includes GraybeardsRus. He has 35 years of industry experience, including founding Security Associates International in the 1980s.