Banks court accounting firms
And some are even offering specialized services for partners, too
BY RICHARD STOLZ
A cash flow challenge for many CPA firms
(especially those that do a lot of tax work)
— which banks report they are eager to help
solve — involves the cash gap between the
period in December or January when bonuses are paid out to partners, and the spring
months when clients pay for tax preparation
services. “We do a lot of lines of credit” for
such firms, said Gary Gilbert, executive vice
president and senior business loan manager
for BB& T, a Southeastern regional bank with
operations in 12 states.
It’s nice to be wanted.
Large commercial banks have decided that
public accounting firms, despite their typically modest borrowing needs, are highly desirable customers. They have several reasons
for coming to this conclusion:
;CPA firms can be a good source of referral
business from their clients;
;A CPA firm’s partners and senior managers may be likely to switch their personal
banking arrangements to the bank that handles the firm’s business;
;CPA firms have, in the words of one banker, “not gone through the trauma” that many
law firms have, as symbolized by the recent
spectacular bankruptcy filing of Dewey &
LeBoeuf; and,
;Small CPA firms may fit into a bank’s
larger push to expand their commitment
to small business in general. (“Small” may
include firms with up to $20 million in revenue, based on Small Business Administration criteria.)
The upshot of all this is the emergence of
a marketing push to capture CPA business
with packages of banking services deemed
to be custom-tailored to the needs of public
accounting firms.
Whether this marketing effort will deliver
any genuinely new services and economic
benefits to accountants and CPAs will vary
from one bank to the next — but the attention may be welcome.
tions for Accounting Professionals”) last year
“because we saw the value of this customer
group. It’s extremely important to Citi,” said
Maria Veltre, a managing director at Citi who
heads up the bank’s small business unit.
“We have looked at this space and love it,”
proclaimed Jay DesMarteau, who holds an
equivalent position at TD Bank, which operates about 1,350 “stores” (the term preferred
to “branches,” with its “stodgy” image, according to DesMarteau) on the East Coast.
TD expects to formalize its marketing program and service package for public accounting firms by the end of the year.
One way that TD Bank expects to express
its love for the public accounting field is to
follow the approach it has recently taken
with medical practices in making practice
purchase lending decisions based on the
practice’s business valuation, instead of the
strength of its collateral. “Collateral coverage never looks that good” with professional
practices, DesMarteau conceded.
TD Bank now offers medical professionals
100 percent financing on 10-year term practice acquisition loans, although it might not
offer those precise terms to CPA firms.
For its part, Citibank offers an “automatic
second look” if prospective borrowers initially don’t make the grade according to
standard credit criteria, and has a “robust”
process for assessing creditworthiness, according to Veltre.
DEDICATED TEAM FOR CPAS
Bank of America, for example, proclaimed
a “new milestone” in 2012 when it extended
a practice acquisition financing service originally focused on medical professionals to
CPAs. The bank reports that it has a “
dedicated team of specialists who focus solely
on providing financial solutions for the CPA
accounting and tax markets” throughout the
country.
Citibank, meanwhile, came out with its
dedicated CPA package (“CitiBusiness Solu-
SMALL BUSINESS PUSH
Earlier this year Citibank declared its inten-
tion of expanding lending to small businesses
based on a “fundamental goal” to “create eco-
nomic value and support progress.”
Beyond the generalities, Citibank has de-
termined, through customer surveys, that
what matters most to many accounting firms
is cash management, Veltre says. Sophisti-
cated technology-based cash management
solutions being offered to CPA firms (not to
mention all other business clients) include
remote check deposit, credit/debit card
merchant services, payroll systems, and the
panoply of online banking services that have
become a staple of the banking industry in
recent years.
The pitch to CPA firms is preferred pricing
arrangements, including waived fees and low
(or zero) account balance requirements.
CASH MANAGEMENT SERVICES
Debt consolidation — perhaps more of a
working capital optimization exercise than
a cash management function — is a need
among some CPA firms that Bank of America
is willing to perform. The bank says that it
will finance up to 70 percent of a practice’s
revenue for that purpose, with terms as long
as 10 years, “with flexible principal reduction
and early payoff options.”
A common borrowing need of CPAs — not
the firm itself — involves financing a partner-
ship interest when the accountant is invited
to become a partner. Union Bank’s “capital
contribution buy-in program,” according to
David Jochim, a senior vice president and
director of the bank’s professional business
services unit within its private bank group,
allows new partners to finance 100 percent
of their purchase for terms up to five years,
without collateral, priced at prime. While
these are personal loans to individual bor-
rowers, this loan program applies to partners
of accounting firms that have an existing re-
lationship with Union Bank.
Equipment financing is another, perhaps
more routine, credit need that banks are anxious to provide. Bank of America’s offering
in this area, under its “Practice Solutions”
service package, for example, features fixed-rate loans from $10,000 to $75,000 for up to
seven years, with no application or documentation fees.
BB&T, which folds leasehold improvements under the same umbrella as equipment financing, tries to tie the loan term to
the relevant amortization schedule for the
items being financed. That means the purchase of an office’s worth of desks might be
financed over 10 years, whereas a standard
computer might require a much shorter loan
term, Gilbert said.
COMMERCIAL MORTGAGES
One banking service for accounting firms that
seems to garner more interest, at least among
some bankers, is commercial real estate
mortgages. “We are focused on owner-occupied commercial real estate,” said Gilbert.
