Why You Need to Love Your Banker
You work hard on enhancing your relationships with your suppliers and your customers because you depend on their contributions for the success of your business. Do you extend that same level of effort to your banker? On any given day, business owners will say they experience frustration with their accountant, insurance broker, lawyer, or banker. Pick the day – we’ve all had one.
However, consider looking at your banking relationship a little bit closer. Think about this – why do you take your key supplier or customer out for lunch, golf, fishing or whatever? Because that relationship is very important to your business and it needs nurturing. Why wouldn’t you do the same thing with your banker? Why would you not want to enhance that relationship also?
The reason you would is because your banker supplies you with something critical to the growth of your business – that is credit. Unless you have very deep pockets and thus prepared to fund the growth of your business yourself, you are going to need a good supply of the bank’s product. To maintain regular and growing access to that product, you will need to develop a strong banking relationship, whether you like it or not.
A strong relationship will put you in the best position (and the banker also) to obtain the necessary financing to manage or grow your business. If your growing business needs additional term debt for new equipment or an extension of your line of credit, or your business gets caught in a downturn or unanticipated economic situation that requires additional financing to right the ship. Or that once in century pandemic where some companies go from “100 to 0” very quickly. From the banker’s perspective, the ones with good relationships are easier to navigate.
You will need a banker who knows your business and is supportive of the management team. You will need your banker to describe your company in the best possible light to the credit department. In other words, you need a cheerleader within the walls of the bank to waive your flags on your behalf to access the credit facility you need, when you need it and at the most favorable terms and rates possible.
There should be a large element of trust built up between both parties based upon great communication, proper compliance and reporting.
But what does that good relationship look like? Here are some considerations:
- The banker has toured your location more than once and is very familiar with your operations
- The banker knows you and your senior management team well and respects them (one of the most respected bankers in Calgary once told me that he looks for three things in any company before he lends any money – 1) management, 2) management, and 3) management)
- Your monthly and annual financial reporting is accurate and on time
- You can provide your banker with a proper set of financial forecasts including balance sheet, income statement and cash flow statement – maybe even including best case / worst case as this shows management has thought through all the possibilities
- You understand the lending facility letter or term sheet you signed and respect its terms
- You do not call your banker asking more money than your facility allows the day before you need the money (or at least not often and your reasons are explainable)
- You try to understand banking from the banker’s perspective. Generally, a lot of lending decisions are out of his or her control. Enquire about their processes directly, with some empathy for your lending partner’s position
- Both parties always do what they say they are going to do and in the time frame discussed
- Your banker is looking out for you and your business, using his or her contacts to help your business. It might be a possible corporate acquisition candidate, assistance in filling a senior role in your company or an introduction to a possible new customer or supplier
- If no further lending is possible, the banker is happy to make alternative recommendations.
- Rates and fees are commensurate with the quality of the company and the relationship
- Personal guarantees are subject to honest discussions, negotiated in good faith and reduced based on achievement of agreed metrics.
Those who do not work on this banking relationship, as the old saying goes, operate at their own peril. Through cycles of quick corporate growth, constricting economies and now Covid, those who have worked on their banking relationships over the years and developed the level of trust have the best chance of banker support when needed the most.
This is why you need to love your banker and show it.
The team at Stawowski McGill can help you with not only finding that right banker to fit your needs, but we can also work with you and your company to maximize the relationship with your existing banker through our financial leadership, strategy and sounding board processes.
Brian McGill, CPA, CA – Senior Partner Stawowski McGill
Stawowski McGill celebrating the 20th year of service to private company owners, family business and entrepreneurs as business advisors.