Leading a business in this economic climate is challenging enough. Not having a strong relationship with your bank could create more challenges as you plan to grow your company. Developing an effective partnership with your lender is a critical component to the success of your business. The following pointers will help you nurture that relationship.
1. Communicate, communicate, communicate!
This is the most important element of a successful banking relationship. Bankers do not like surprises. Be sure to constantly communicate successes, opportunities, and challenges. Tell them the bad news, as well. As your partner, they can offer solutions to help you through the situation. An effective way to achieve this is to meet with your banker frequently (at least once per quarter). In addition, get to know the other key members at the bank, including the team leader and credit manager. This will strengthen your relationship and may help the transition if your primary contact leaves the bank. Finally, discuss what’s happening in your industry and, more importantly, how you are positioning your business for anticipated changes.
2. Know your business needs.
Determine what capital is required to meet your current and long-term growth strategies. Be prepared to discuss these needs with your bank to put a meaningful financing structure in place. Also, develop and periodically update your business plan, including all appropriate financial projections. Finally, focus on your core business. It may be risky to experiment in unfamiliar lines of business.
3. Negotiate and follow the terms of your agreement.
In negotiating the financing agreement with your bank, it is critical that you understand the covenant requirements (financial and non-financial), along with other key terms in the arrangement. The covenants need to be realistic to ensure that your company does not consistently fail to meet the requirements. For required financial statements, borrowing base certificates, and other pertinent financial information, be proactive in providing the information timely and accurately. This will add to your credibility and help strengthen the relationship, particularly during times of need and the renewal process.
Successfully managing your banking relationship can be achieved with effective and constant communication, understanding your business growth needs, and adhering to the terms of your agreement. A healthy banking relationship will likely improve the chances of achieving successful results in your business. Plus, your bank is more likely to be there for you when you need them most.
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