When Is It Time to Change Banks?
Large banks operate through policies, processes, and committees, and once fatigue sets in, relationships rarely reset.
By Ami Kassar
Choosing to leave your bank is a tough decision for any owner. Not because it’s dramatic, but because it’s emotional, practical, and often tied to years — sometimes decades — of shared history.
I am currently working with a manufacturing company that has been with the same bank for 25 years. It’s a long, stable relationship built over multiple business cycles—but you can probably guess where this is going. Three years ago, the bank was acquired by a much larger institution. On the surface, not much changed. Same branch. Same people. But beneath the surface, the decision-making authority and credit philosophy shifted.
Around the same time, the manufacturing sector was facing a difficult period, and this company was among those struggling. Performance declined, pressure increased, and eventually the business landed in the bank’s workout department, where it has remained for nearly two years. Throughout that period, the owner has stayed engaged and communicative. He believes that if the business improves, the bank relationship will improve as well. And recently, the business has improved. Orders have picked up. Cash flow has stabilized. Momentum has returned. Despite that progress, the bank charged off and froze the company’s line of credit, making an already challenging situation significantly harder at a moment when liquidity mattered most.
This owner is deeply relationship-driven, which is usually a strength. He believes that by staying close to the branch manager, things will turn around. In a smaller bank, that might be realistic. In a much larger institution, it’s unlikely the branch manager has meaningful influence — especially over an account that has spent years in workout. Large banks operate through policies, processes, and committees, and once fatigue sets in, relationships rarely reset. That doesn’t mean the owner is wrong. It means the relationship has changed, even if the faces haven’t.
At this point, the primary risk to the business is no longer performance — it’s liquidity. When access to capital becomes uncertain, owners stop focusing on growth and shift to survival. Decisions become shorter-term and more reactive. Even improving businesses can lose momentum when cash flexibility disappears.
For this company, moving to another bank likely doesn’t mean moving to another traditional bank — at least not immediately. A transition to an asset-based lender, or an ABL group within a bank, may be the right next step. While that may increase the interest rate by 1.5 to 2 percentage points, it provides something far more valuable: reliable liquidity.
There are two types of credit lines. Evergreen lines usually have few stipulations except that for one month a year you need to carry a balance of zero on them. If your business sells to other businesses, you might consider an asset-based line of credit that will be secured by your accounts receivable and possibly by your inventory. As your accounts receivable and inventory fluctuate, so will the amount you can borrow. While asset-based lines are generally more expensive than a standard line of credit, the extra cost may be worth it in cases where they give you a lot more liquidity. It allows the owner to focus on growth and operations rather than constantly worrying about running out of cash.
This isn’t a failure. It’s often a bridge. Many healthy companies pass through asset-based lending after a downturn before returning to more conventional bank relationships.
Banks change. Companies change. Markets change. And if you’re not careful, your relationship can suddenly become a distraction. Keep in mind that every business should have a line of credit with the greater of 10 percent of your total revenue or 85 percent of your accounts receivable and 50 percent of your inventory. The line of credit should be used to deal with seasonality, working capital, and emergencies. In some instances, if you absolutely don’t need it today, it should be thought of as an insurance policy. If your bank is not willing to provide this to you, you are probably at the wrong bank.
Your goal is to keep your business liquid, moving forward, and positioned to grow. Sometimes the most responsible decision an owner can make is to thank a bank for the past — and choose a partner built for the next chapter.
Ami Kassar is CEO of MultiFunding.
