August 15, 2022

“I sit on the Board of our local bank, and I know for a fact that they give our group the absolute best terms that they can offer. They just can’t do any better!” OR CAN THEY?

In Missouri, a physician served on the bank’s Board and was witness to his bank proposing pricing to his group that was lower than they (or any other client) had ever seen from that bank. It was the same story in Pennsylvania where the group’s CEO sat on the bank’s Board.

How and why does this happen when doctors and executives who serve as Board members at their group’s bank already receive favorable treatment in return for volunteering their time and expertise to serve on the Board?

The answer is pretty simple. When local banks are provided with knowledge and understand what they need to do in order to retain a good client, they will go to places they’ve never been and good things will happen for the physician groups.

Here’s an industry secret: Banks don’t always know as much as you think they do. In fact, when I was working on Wall Street as a commercial lender, I only had information about the terms my own bank was offering. In fact, most of the time, banks will only share knowledge on a local level to take advantage of market disparity.

That’s why I love working at CMAC. With detailed information about lending terms at a wide spectrum of banks and a database of thousands of term sheets from nearly every region in the country, that information can be strategically shared with banks to let them understand what they need to do to compete. It can also be shared to let a single banking center understand what its own bank is offering in other markets. With that knowledge these banks receive a “bird’s-eye view” of the real market pricing for a loan, giving them ammunition to offer it to their best clients.

You (and your banker) might think your current deal provides the best possible terms – but that doesn’t mean CMAC can’t empower your bank to go even further. Let’s look at what happened in those instances in Pennsylvania and Missouri: 

Nailing down precedent for each bank’s best rates.

In Pennsylvania, with a $34 million refinance on the horizon, the practice felt certain the loan terms offered by their regional bank were the best they could hope for. After all, their CEO sat on the bank’s Board of Directors, so it was in everyone’s interest to provide advantageous terms.

CMAC, however, had recently closed financing of over $75 million with that same bank at a lower credit spread (the bank’s cut of profits from the interest rate) for a different orthopedic practice. While it’s common for banks to offer more aggressive rates for larger deals, CMAC successfully lobbied the bank to match its own pricing for the Pennsylvania practice, despite the smaller size.

Lesson learned:

Each geographic market has its own competitive environment. By showing the local banker what his own bank colleagues in another territory were offering their clients, CMAC enabled him to get more competitive. After all costs, the improved pricing saved the doctors over $700,000.  

Matching market rates nationwide.

A Missouri practice faced a similar situation: their Acting President sat on the Board of their bank and received very attractive terms for the refinance and expansion of the practice’s real estate. He was told they were “the best available” … but he decided to work with CMAC to make sure his group wasn’t leaving anything on the table.

CMAC provided the local Missouri bank with data showing the all-in spreads and rates quoted by banks nationwide on our most recent closings. With more information about what offers other banks might make to take over the business, the local banker was able to lower her own bank’s rate and keep a valued client. The doctors were delighted to stay, but with savings of over $800,000.

Lesson learned:

Bankers need to know how their rates and terms stack up in the wider market, and CMAC can help them access that information.  While maintaining lender confidentiality, CMAC provides recent and accurate data about similar loan closings, giving the bidding bank a complete picture of the market – minus the guesswork.

There’s no question that supporting your bank is a “win-win-win” for your practice, your bank, and the community – but when it comes to finding the best lending terms, it’s not the bottom line. By working with CMAC to connect your bank to the right market information, you can empower them to set you up for financial success.