Career Guide – Small Business (SME) Banking

In Retail Banking by Gaurav SharmaUpdated On:

What is Business Banking?

Business banking is a client segment providing banking products and services to small and medium enterprises. There is no universally accepted threshold that specifies which client will fall into the business banking segment. Some banks set the range between USD 1 million to 20 million in annual revenue, while others define it as USD 500K to USD 5 million. It’s mostly dependent on each bank’s strategy and structure.

Some banks use the term commercial banking instead of business banking, but since it’s non-standard usage, I will just use “small business banking” here in order to avoid confusion.

Small businesses require banking products like:

  • Business credit cards
  • Business checking and savings accounts
  • Global remittance services and foreign exchange
  • Online banking
  • Revolving lines of credit
  • SBA loans in the US and equivalent programs in Europe
  • Term loans, unsecured business loans, working capital loans etc.
  • Basic trade finance products like letters of credit
  • Cash and liquidity management products
  • Merchant services like point-of-sale machines and payment processing
  • Payroll processing etc.

These are some of the products that the business banking unit delivers to its clients.

Business Banking vs Corporate & Investment Banking

Small businesses require their own unique set of banking products and services. For example, they will likely require direct loans because they cannot access the debt or equity capital markets. Similarly, they are much more likely to use business credit cards and point-of-sale card swiping machines and less likely to use leveraged finance or merger and acquisition services unlike large corporations.

It is this difference in their core banking needs that necessitates the creation of separate small business banking teams. It also means that business banking professionals are mostly based out of local bank branches so that they can be closer to their client base and service them more easily.

Job Description

Business bankers are just coverage managers for small businesses who provide a full spectrum of services to their clients. I have already listed some of the banking products and services in the previous section. Those are the products that a business banker has to deliver to their clients in conjunction with other product specialists and teams.

The role of a business banker may be divided into the following broad categories:

Business Development

  • Business development in business banking means meeting with local businesses, attending industry events and other marketing activities in order to initiate new relationships.
  • Often times, the bank is approached by walk-in customers or leads are provided by third parties and in such cases, you will just have to take the process forward.
  • Unlike corporate and investment banking where clients are segregated based on industry, business banking usually has small areas that each RM covers.

Client Onboarding

  • Client onboarding is the process of completing all the regulatory paperwork, signing the contracts and preparing for service delivery. It might seem like a simple process, but it can be a long and arduous process and can end up taking most of your time.
  • For example, the bank will have to comply with local Know-Your-Customer and Anti-Money Laundering guidelines, check for sanctioned-country linkages and compliance with internal environmental or reputational risk guidelines, perform a thorough credit risk analysis and so on.
  • As a business banking manager, you will be responsible for pushing through all these checks, coordinating with the client and getting everything done on time.

Relationship Management and Client Servicing

  • Once a client has been onboarded, you need to manage the relationship in order to grow your business. This includes periodic meetings with clients where you discuss any business-related issues or concerns or talk about new products and services.
  • Maintaining the client account also requires periodic updating of documents, financials and other paperwork. There might be other teams handling this, but the business banking relationship manager is the one ultimately responsible for all things related to their client.

Cross-selling and increasing wallet share

  • In order to up-tier the overall business relationship, business bankers are expected to pitch additional products and services to the client from other divisions as well.
  • For example, you may introduce your bank’s local wealth management executive to your business banking client if you think the client could use such a service.
  • In most cases, the business banker is credited for all revenue generated from a client. But even if that is not the case, you will still be expected to assist your colleagues with their business development efforts. The most successful retail banks are the ones which cross sell really well.

Risk Management

  • Although many banks have dedicated credit analysts who perform detailed analysis for each client, you will still need to manage the overall risk of your client.
  • The credit analyst’s job is going to be to measure the risk. It is the job of the business banker to manage that risk and come up with ideas to mitigate it in partnership with other teams including the credit analyst.
  • For example, if the risk of a direct credit exposure is too great, the relationship manager might discuss the issue with the client and ask them to provide some sort of collateral to secure the loan. There dozens of other such risk mitigation strategies and knowing what to use when and how to convince the clients is a key factor in achieving success.

Providing Leadership

  • Depending on the structure of the bank, a business banker may be assisted by other team members. For example, you might have an assistant relationship manager who helps you with some of the paperwork needed to on-board or service your clients. Your branch might also have a credit analyst who assists with all the credit risk related modelling and structuring. You will have to provide leadership to your team.
  • As you rise through the ranks, you will have other business bankers who will be reporting to you as you take more of a leadership role.

Qualifications and Skills

Sales and relationship management – This is going to be your bread-and-butter. At the end of the day, your job is to convince clients to do business with the bank and make sure they stick with you. Business banking relies a lot more on personal relationships than corporate or investment banking roles. A good salesman can significantly impact revenue generation at a branch and small clients tend to prioritize client servicing to greater extent as well.

Risk management and credit skills – Business banking products do not generate as much revenue from fee-based services as the larger client segments do. This means that you have to sell interest generating credit products which means that the bank has to take some direct exposure on the client.

Given that the clients are usually small businesses, this requires a very good understanding of business and credit risk.

Business instincts – Large corporations are professionally managed by an army of executives but small businesses usually rely on one or two key personnel. Therefore, it becomes very important to get a sense of how those key personnel will perform and manage their business. Business banking is therefore not just an exact science but requires some instinctive analysis as well.

In fact, the credit analysis memoranda of most banks have a section dedicated to the analysis of the management personnel where they subjectively evaluate their capacity to continue the business and grow it.

Leadership skills – Business bankers lead a team of assistant relationship managers, branch personnel, credit analysts and others who assist them with client onboarding and risk management etc. You will have to take point on most tasks related to your client since you have the ultimate responsibility for managing that relationship.

Result and performance orientation – Business bankers have to deliver results and meet targets in terms of revenue, increasing wallet share, delivering superior client service, onboarding new clients, cross selling other bank products and so on.

It is a role that is best suited for competitive sales-oriented professionals who thrive in challenging business environments.

How to become a Business Banker

Business bankers are expected to be college graduates ideally equipped with a business, finance or economics degree. However, other degrees are also welcomed as long as you have the necessary business acumen.

In terms of work experience, 2-5 years of sales experience with small businesses is generally expected as you will be leading client relationships and selling a number of varied products. Most banks will accept professionals who have sales experience in other financial services firms, but even industry outsiders are often considered for the role.

If you don’t have prior sales experience, then it would be best to get a few years of experience as an assistant relationship manager or a credit analyst or some other supporting role. This will give you exposure to banking products and services which will improve your chances of securing an interview for a business banking role.

Building your CV

Focus on your sales and relationship management work experience, if you have any. Rather than making subjective statements, try to sprinkle objectively measurable stats and numbers. For example, you could mention that you grew revenue by X% in one year or something of that nature.

Experience with other financial services products will also be a positive and deserve a place on your CV. However, remember that the focus is going to be more on your abilities as a salesperson since product knowledge can be gained on the job.

Some amount of technical capability is necessary since you will be performing financial statement analysis and credit risk assessments. You don’t have to go overboard if you already have a finance, economics or other mathematical degree. But if you don’t, then completing a course on credit analysis or risk management would definitely prove helpful.

Salary and Bonus

Junior to mid-level bankers can expect a salary of USD 40,000 to USD 90,000 plus a variable component of 10% to 80% based on performance. As you move into leadership positions, your competition will keep on increasing at a decent rate.

One interesting thing about compensation for business bankers is that the incentive structure is rather generous even when compared with corporate or investment banking. What this means is that you can increase your compensation several-fold if you manage to increase the bank’s revenue significantly.

Some banks even offer incentives on a quarterly basis to business bankers instead of just the year-end bonuses that you get in corporate or investment banking. Business banking is therefore more of a performance-oriented role compared to what a lot of other banking careers offer.

A Normal Day in Business Banking

As a business banker, you will start your day just like any other salesperson or relationship manager – by checking your emails. There are usually client requests asking for some information or an email from one of the internal teams regarding some risk or compliance issue. You’re likely to spend almost half your time responding to mails or attending calls.

Once you have cleared out your mailbox, it is time to head out to meet some clients! Most bosses expect sales and relationship managers to be out on the field all day meeting with existing or potential clients. Depending on the location that you cover, you might have several meetings lined up for each day. This can be quite a fun part of the job if you like meeting people.

The second half of the day is usually spent doing administrative work and housecleaning activities. I’ve detailed some of these tasks in the job description section – it includes things like reviewing risk metrics, completing paperwork, filing regulatory compliance reports and things of that nature.

There might be some amount of travel involved depending on the region that you cover. Some clients have their businesses in the middle of nowhere and you might have to drive down in order to meet with them or perform a field visit.

Working Hours

Business banking can be rather agreeable when it comes to work-life balance and stress. You won’t be working out of the head office in New York or London. You will likely be in a small regional town and that fact can significantly improve your quality-of-life.

No need to impress your bosses by staying at work beyond 6 PM. Business banking is more of a 9 to 6 type job. Although, things can get hectic sometime if you have a lot of new proposals and you might have to put in some extra hours on those days.

Career Path and Progression

Business bankers cover a lot of banking products and that gives you quite a few options when it comes to career growth. Not only do you learn about banking products, but also risk management, sales, relationship management and compliance. Here are some of the career options available to you:

Continuing in business banking

Although business banking clients are smaller, this segment is still a major focus even for large international banks. The reason for this is that all the large corporate clients already have several bankers competing for every penny of their business. This makes corporate and investment banking very saturated. Banks are therefore focusing increasingly on the under-banked small and medium business segments.

This not only provides you great job security if you choose to continue in business banking, but it also offers a healthier work environment with less cutthroat competition.

There are plenty of organic growth opportunities in business banking. In larger towns, you can expect to manage several teams of business bankers. Beyond that, there are regional and country level positions which means plenty of opportunity for career growth.

Moving to bigger client segments

Business banking usually handles clients up to USD 20 million or thereabouts. There are bigger client segments like a middle market segment for clients ranging from USD 20 million to 200 million. And yet another client-segment handling clients from USD 200 million to 2 billion and so on.

(Note: Different banks have different thresholds for this. These are just indicative figures.)

Over time, you can choose to move to one of these bigger client segments. These divisions have fewer but larger clients which changes the dynamics somewhat. You focus more on managing relationships with existing clients and have fewer opportunities to on-board new clients as there are fewer companies in these larger segments.

Another change is the product mix because larger companies have different requirements. For example, they might import a lot of raw materials and they may require a lot of trade financing.

Your pay is likely going to increase if you handle bigger clients though, so it is something that you should always be on the look out for.

Sales roles outside banking

Business bankers really get to learn a lot about how small businesses operate. Not only that, but you’re also very likely to develop strong relationships with small businesses in your area. This will make you an ideal candidate for any company looking for a sales manager who knows his area of the woods well.

Companies are likely to offer you a significant bump in your total compensation in order to pry you away from your current employer. This is one of the advantages of being in a sales role – your key assets are the relationships that you build and not just the product knowledge.

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About the Author

Gaurav Sharma

Gaurav (LinkedIn) started his finance career as an intern in Citi’s Institutional Clients Group in 2009, eventually ending up as an Associate Director at Standard Chartered Bank’s Corporate & Institutional Banking division a few years later. By 2016, he was an independent consultant helping FinTech start-ups in London with product development and launch. Gaurav also helps banks with their digital banking initiatives and advises PE & VC firms with investments in the financial services and FinTech sectors. Gaurav writes on topics ranging from EU banking regulations and tradional finance to Blockchain startups and the future of banking itself! He has an Engineering degree in Computer Science and an MBA with a double major in Finance and Marketing. He is also a Certified Financial Risk Manager.