4 Steps to a better bank relationship

 

 

 

 

 

 

 

 

by Karen Turnquist

“I’ve been a customer of my bank for 20+ years and this is how they treat me?!”

Raise your hand if it’s something you’ve uttered or heard others say in a moment of frustration.

In instances like that it can be difficult, but it’s important to remember that relationships are a two-way street. Even when we’re the customer, it’s still our job to tend to the health and stability of our relationships with vendors and service providers, including our bank.

What we’ve done—or not done—to foster those relationships plays an important role when it’s time to weather the inevitable ups and downs of any long-term relationship.

It’s something I was reminded of recently in my conversations with two business owners who contacted me to inquire about securing a line of credit from Sage.

From black to red

After a series of events took the business, which had a 20-plus-year history of profitable operation, suddenly into the red, its co-owners commenced a grueling 18-month process to recast the business.

While the resulting improvements put the business on track for an impressive turnaround, the results weren’t immediately reflected in the bottom line.

And so, despite a promising outlook, the company received some unexpected news from its longtime bank: “We can no longer provide funding for your business. You have sixty days to find alternatives.”

This is how they treat me?

The owners were taken aback and angry. After all, the horse had been out of the barn for many months, and, in fact, was now trotting its way back in better shape than it had been in years. Why jerk the rug out from under them now?

During the search for a new lender, the company’s bank, noting the progress the business had made, extended the line of credit another 60 days.

“Why don’t you stay with your current bank?” I asked the owners.

“You’ve been a customer for more than 20 years, they just extended your deal for another 60 days, and it sounds like they like the progress you’ve made. After another couple months of solid operating results, you may be able to ask for an extension through the fiscal year end.”

But the owners, who admitted they do like the banker, said they were too disillusioned to continue the relationship.

Happy ending

After some prodding, however, they did agree to meet with the bank to thank them for their support through the years, to walk them through the improvements that had been made and those that were still planned. They highlighted the financial effects of their changes and humbly asked for an extension and the opportunity to prove the company would be a good long-term customer for the bank.

The result?

The bank extended a total of $8 million in loans through the fiscal year end and added a $300,000 term-loan for some badly needed new equipment.

In retrospect, the owners realized they had been so focused on their operation they had neglected their important relationship with their banker and, in fact, had taken it for granted.

A better relationship: Bank on it!

So, want to create a healthier, more stable relationship with your bank?

Here are our top four suggestions:

1. Look for a good fit

A good relationship starts out with a good fit. Is your bank focused on customers like you—the size of your company and its lending needs? In your industry? Does the bank offer the kinds of products and services your company needs? Will the bank meet with you in person at your business? Can you meet the decision makers?

2. Initiate face time

If you’re borrowing money, meet with your banker once a quarter. Invite her to stop by and see your business. While you’re at it, get to know the entire team at the bank. Invite analysts, managers and others involved in the relationship to attend updates and reviews.

3. Keep your promises

When you signed your loan documents, you promised to send timely and accurate financial information to your banker. Bankers are evaluated internally, and externally by regulators, by the quality and timeliness of the information they provide. Make your banker’s life easier by keeping your company off the bank’s list of non-compliant borrowers.

4. Communicate!

• Clearly articulate your business plans and share your business goals. The more your bankers know about your objectives, the better prepared they will be to respond to your banking needs.
• Share some news now and then. Did you land that great new customer? Hire a new head of ops?  Conversely, don’t surprise your banker with bad news. If sales are lagging because you’ve lost a large customer, call your banker and give her a heads up before she sees next month’s financial statement. Transparency is a sign of a strong relationship.

Cooperation, communication and consistency are necessary in all good relationships, not just romantic ones. Although nurturing our long-term relationships is not hard to do, it does take time. But making that effort will pay dividends for you and your company for years to come.

Now that’s an ROI we can all get behind!

As the CEO and founder of Sage Business Credit, Karen Turnquist helps entrepreneurs build value in their businesses. She’s facilitated more than $2 billion in accounts-receivable financing for emerging businesses and believes there’s no greater reward than seeing fellow entrepreneurs succeed.