How to Have Difficult Conversations with Your Lender

Guiding a business through this current economic environment is challenging enough. Not having a strong relationship with your bank could make things even tougher.

Despite the critical nature of the relationships, many executives overlook the importance of communicating with their banker on a regular basis, and fall into a pattern of waiting until they are encountering difficulties before reaching out to the bank. Following are four tips to help you get the most out of your banking relationships:

Build Trust through Communication

Regardless of whether you have worked with your bank for 2 or 20 years, it is important to communicate with them throughout the year and keep them informed of business trends. When business owners are transparent with their bank and actively communicating with them – during both good and bad times –it aids in building trust and strengthening the relationship. If you avoid surprises with your bank, it makes the difficult conversations easier to have.

Treat Your Bank as a Partner

If you treat the bank as a partner rather than a vendor it makes the difficult conversations a little easier, as your banker is often familiar with the challenges you are facing given the large number of other businesses with which they work. Consider scheduling quarterly meetings with your bank to keep them abreast of current financial results as well as short- and long-term goals. As you would with any business partner, don’t be afraid to ask them for their input to rectify an issue.

Provide Deliverables to Promote Transparency

Aside from your quarterly calls or meetings, consider what types of deliverables would help your banker understand current trends. Consider providing your bank with the following items:

  • Financial reporting package, including variance analysis
  • Budgetary information, including details for significant variances between budget to actual information
  • Covenant calculations, actual and projected
  • Executive summary of strategic alternatives for challenges faced, if any
  • Cash flow projections

Utilize Your Other Advisors

Don’t be afraid to utilize third party advisors to help you have the difficult conversations with the bank. Business owners typically speak with their CPAss, attorneys, financial advisors, etc. throughout the year. Bringing those trusted advisors into difficult conversations is a good way to provide a different perspective to your bank.

Following these tips can ensure that when the time comes to have those difficult conversations with your lender, there will be less angst for all in involved.

Thomas Yankanich can be reached at Email or 215.441.4600.

Subscribe to Kreischer Miller's email newsletter

You may also like: