Business Relationship Management – Is your banking relationship sound?
For many businesses, a good banking relationship can be the difference between modest or strong growth. Your banking relationship is much like any other relationship. You need to nurture it and it’s important to understand your banker’s point of view, business relationship management is critical. Hopefully, I’m on point with these but I would appreciate your comments to help me refine things. Here are a few of my initial thoughts:
- First and foremost, remember bankers are taking a risk on you and your business. If you don’t have your stuff together or, your business has problems, you can expect to have problems getting credit.
“modest or strong growth”
- Notice I referenced “modest or strong growth” in the opening sentence. If your cash needs aren’t related to growth, either top or bottom line, the bank probably isn’t the best source. Examples of growth could be financing to buy a building, a piece of equipment, or another business or perhaps a line to finance growing customer orders, buy inventory to obtain quantity discounts, or pay bills early to take advantage of discounts. Bankers don’t typically provide turnaround financing. If your business isn’t healthy, it’s up to you to get it turned around and then perhaps get your banker on-board to finance growth.
- Banks have certain industries/locations that they will not lend to; don’t take it personally. Banks need to balance their portfolio of loans and if your particular line of business happens to be in a space where they have “maxed-out” it will be very difficult to get credit. Fortunately, the bank around the corner may be ready to lend to you. It’s just a part of the business but be aware you may need to look at some other banks.
Bankers hate surprises…at least the bad ones!!!
- Bankers hate surprises…at least the bad ones!!! If you lose a major customer, are being sued, have a new competitor, or just see a rough spot ahead call your banker…business relationship management is key. With a little forewarning the bank may be able to make some changes that help keep you in good standing. If you wait until you can’t wait any longer, it’s probably too late.
- Paperwork rules – It used to be that as long as you made your payments you were good to go but for most banks but that’s not the case anymore. As a result of the near melt down in ’08 the banks are required to maintain much more detailed information on their customers. There are three primary Federal agencies regulating the banks and they will dock the banks for not maintaining the paperwork. These requirements come from the regulators not the bank or your banker. Help your banker out by getting financial statements, tax returns, personal financial statements, etc. over to them on time…they may be able to help you out in the future.
- Your banker doesn’t have final say on any loans. Every bank has a credit committee that approves the loan. The credit committee’s job is to review your information and assess the “quality” of your credit. They will look at your personal history as well as the results from your business, industry, and geographic region. Based on what they see they can impose certain requirements and conditions as well as the structure of the loan. They are the folks that analyze what the downside could be and how to protect the bank in that event. If you have a good banker, they will understand the thought process of the committee, let you know what to expect, present your business in the best possible light, and negotiate with you if some of the requirements need a few changes.
Navigating the banking process can be daunting! Our motto is “Cash. We Help You Get It®” as a partner at B2B CFO®, business relationship management and help with obtaining financing is part of what I do. Need some help? Give me a call.
Christopher Buls – Expert in Business Relationship Management
Partner B2B CFO®
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