Building a strong banking relationship is one of the most important tasks facing company management. Yet some view their banker as little more than a meddling “outsider.” Having a bank “in your corner” however, can mean the difference between success and failure in creating a solid business and in having the flexibility to manage in any situation.
• Selecting a bank requires consideration of a number of factors. Among them are:
Size of the institution
First, is the bank able to meet your borrowing needs? A bank’s legal lending limit imposes a maximum that the bank may lend to any one customer, so choose a bank that can meet your current needs and one that has sufficient resources to grow with your company.
Second, the size of the bank may affect the services offered and dictate which market segments are served. If you are a smaller company, ask if your bank is committed to small- business lending. And do you both agree what “small business” means? Talk with peers for recommendations of banks that work actively with companies like yours.
Services
What services will be important as you look to the future? Cash management? International banking? Investment management services? Think about what you need now and what you may need in the years ahead.
Industry awareness
Bankers do try to understand your business, as well as any unique factors in your industry. These might include extended terms for accounts receivable, the need for deposits with vendors, inventory practices, or higher cash requirements for daily operations. Ask your banker about his personal experience with your industry.
Does the bank serve any of your competitors, or companies in related industries? If so, what has been its experience with such companies? The latter is important because a bank’s industry experience may affect its relationship with you regardless of your company’s financial performance.
Your representative
Finally, get a commitment from the bank as to who will be servicing your account. Ask about his or her level of authority, then make a careful judgment as to whether you can work constructively with that individual. The personal rapport you develop and the trust that is created will have a great impact on the support you receive.
• Just as important as choosing the correct institution is managing the relationship.
Communication is key
Once you have chosen your bank and banker, immediately create an active dialogue. Communications between parties should be clear and concise. Keep your banker informed about financial and market developments and changing industry trends. Provide sufficient detail so your banker can explain your business and future plans to his colleagues, especially to those making credit decisions.
Deal with integrity
You must build a high level of trust with your bank. Manage your business with the highest integrity. Establish clear guidelines to ensure that employees follow company policies and procedures. All communications with the bank must be accurate, clear and presented in such a way as to encourage real understanding of the major business and financial issues.
Keep your banker informed
If location is the rule in real estate, then “communicate, communicate, communicate” is the golden rule for banking relationships. It is vital that your banker is up to date on company operations, in sales successes as well as setbacks. Financial statements should be completed on a timely and consistent basis. If this is a challenge, analyze your internal accounting procedures to uncover any roadblocks.
Prepare detailed budgets and financial projections for your banker. These give insight as to where you are taking the business and the opportunities and obstacles you face in achieving those goals.
Remember, your banker will have greater trust and confidence in you if you are forthcoming with information.
Maintain contact
One stumbling block is the tendency to establish regular communications with your banker when times are good and then run for cover when there is any negative variance to plan. When hard times occur is precisely when you should increase contact with your bank.
Bankers understand business cycles, but they cannot provide support if kept in the dark. When discussing difficult situations, be honest about the status of the company, the outlook for the business, and how you are addressing problems. Your banker can provide guidance and may adjust credit arrangements to improve cash flow.
Remember, your banker is your spokesperson inside the bank. The more tools they have, in terms of information, strategies and forecasts, the better equipped they will be to “defend” your company and ensure the bank’s continuing support.
• Bankers work with companies in diverse businesses and industries. Because of that experience, they are best used as a partner. For instance, they are exposed to different corporate strategies, management teams and financial models. As part of your team, they are better positioned than if you treat them as outsiders. Developing a good relationship will help you benefit from their advice and expertise.
Choose carefully, work constructively, communicate effectively and you, too, can have a banker “in your corner” to help you achieve your business goals. •
Craig Bentley (cbentley@bates-communications.com) is an executive coach and senior communications consultant with Bates Communications.
