One of the single most beneficial things you can do for your small business is to have a great relationship with your banker. Many small business owners tend to shy away from their bank. They tend to think of the bank as the enemy, the people that will “give you an umbrella as the sun shines and then take it away when it rains.” It is that unfortunate view that can be very limiting to a business.
Banks not only can infuse much-needed capital into your business, but they can also help navigate through tough times. They can help you network and refer business your way. They often have valuable information about things going on in your town that may directly impact you and your business.
How do you turn a non-existent relationship with your bank into a productive one?
Shop for a bank
The first step is to find the right bank for you. If you currently do not feel you have a good banking relationship, then you probably don’t.
Start asking other business owners who handle their banking and ask them if they would recommend them.
It is a good idea to find a bank that does business with customers your size. Frequently, aiming for a midsize bank is an excellent way to go for small businesses. Midsize banks will tend to pay more attention to small clients but still will have the stability and capacity to serve you long term as you grow.
Prepare for the interview.
After you have identified two to three potential institutions, you should plan to sit down with them to discuss your needs. Come prepared. Bring your financials, both internal and audited, if you have them. Bring any marketing material that will help tell the story of your company.
Banks are businesses too, and the more information you can provide them, the more comfortable they are. You may also want to bring a profile of each person you have in top management roles, so they will know who they are trusting with their money.
Be clear about what your expectations are but don’t go overboard. A new banking relationship is like any new relationship; you don’t want to come on too strong. It would help if you got essential financing complete before you start asking for additional riskier assistance.
Ask them to provide you a summary of the terms of the loan(s) you are negotiating. That will give you an excellent apples-to-apples way of comparing the offers from each bank.
Negotiate and decide
Consider which banker made you feel the most comfortable. You want this to be a long-term relationship,, and you will be spending time with him or her often.
Once you have identified your first choice, you may be able to negotiate the terms somewhat. Some banks are willing to do that; some aren’t. But the worst they can say is no, so you don’t have much to lose. Just remember to always be respectful and reasonable with any request.
After you have made your final deal, make sure you follow through on providing any additional information that the bank has requested leading up to the loan closing to establish yourself as a reliable client.
The most important thing that will keep this new relationship healthy and productive as you move forward is communication. Bankers can be nervous people. They have now given you their money, and now they wonder what you are doing with it and if you will be able to pay them back.
Most banks are going to want to see monthly financials. I would highly recommend sending them even if they don’t ask for them. The more information you can send them about your financial health, the better.
The other thing that may seem counterintuitive to business owners is “bad news doesn’t get better with time.” It is a true statement. Banks report the results of their investments to their regulators just as business owners report their results to the bank.
Head off problems
Business owners are often scared that if you tell your banker some bad news, they will pull the rug out from under you. That is not true. Banks, more likely than not, mainly if you have kept the lines of communication open, will do everything in their power to help guide you through your problems. That fixes their situation with their regulators too.
If you wait until the last minute, or worse yet, after the fact, they may have their hands tied and have few options available to help you.
There are two people that the bank needs to have confidence in: the owner and the CFO/Controller. The owner provides the bank with the long-term vision and path of growth. The CFO/Controller is the person that the banker needs to feel can provide timely financials and accurate cash flow projections, and strong budgeting abilities.
The more sophisticated the financial abilities are in a company, the more comfortable a bank will feel.
In the end, it all comes down to communication and transparency. Taking steps to achieve a lasting, productive relationship with your banker may very well be the best thing you ever do for your business.
HighGrove Partners has been pleased with our relationship with Atlantic Capital Bank here in Atlanta. We hope you will be just as fortunate. Good luck!