Building Relationships with Your Banker

Written by Peter Marsh.

A few weeks ago, at a small business conference, I got talking to a relatively senior member of the banking community, who was there on account of his institution’s sponsorship of the event.

Bankers aren’t generally asked about their business challenges – the boot is normally on the other foot – clients are more interested in their own affairs! But I thought it would be useful to better understand what it was like on the other side of the financial fence.

Some of his comments were surprising, but also enlightening.

“You’d be amazed,” he said,  “at how many small businesses come to us for funding, without the slightest semblance of a business plan.

“Effectively they are asking us to take a giant leap of faith – to finance their endeavor on the basis of what’s in their head.”

It was a good point he made – the best idea in the world still needs the appropriate systems, structures, processes and resources wrapped around it, if it is going to succeed.

Beyond the importance of a business plan, there were a couple of other common sense suggestions he made.

• Get to know your banker on a personal level. Relationships are a two way street – responsibility rests on the shoulders of both parties.
• Keep your banker looped in on any major changes to the business, whether they be structural, strategic or significant amendments to cash flow projections. Reducing the number of surprises helps build trust, and puts the bank in a better position to help, if it’s required.
• In particular, deliver bad news quickly. It will serve you well in the long run.
• Finally, develop an understanding of banking terms (eg credit ratings, cost of capital) and what drives them. It will help when you sit down to negotiate the terms of their loans.

I think a lot of business people see banks – and bankers – as a necessary evil, but if the relationship is good, they can become powerful allies.