Is your Banker a Partner or an inconvenient reminder of a debt obligation?
In good times, most relationships with bankers are likely minimal. But when businesses find themselves struggling, some fail to adequately manage their relationship with their banker, leading to trust issues with a critical partner for their business.
From the many years I have dealt with Bankers, here are a few points that I have found useful in creating and maintaining a positive banking relationship:
- Bankers are trained to avoid excessive risk. They are lending depositor’s money and they have a fiduciary responsibility to protect their depositor’s money. They have lending limits, approval limits, bank rules and Managers to report to. If you want your banker as a partner, learn the rules and treat them like a partner.
- Bankers do not like surprises nor do they like being left in the dark. They can’t help and utilize the tools at their disposal if they don’t know what is going on, so keep them informed.
- Bankers understand negative events happen that are outside of your control. When it is something within your control
such as inventory, receivables, payables, or sales cycles, they expect you to understand these and manage them to your benefit. For those things outside of your control, they expect a plan of action on how you can lessen the impact on your bottom line. - Remember that Bankers have many clients and limited time for each of them. Listen to the feedback they provide, and give them the timely information they require. Written responses to the banker’s needs are often valuable as they provide time to craft a balanced response that can be used as support documentation for the banker’s internal reporting requirements.
- Issuing a quick fire monthly report can be helpful, but only if you balance the communication with a few positive and negative highlights so that the banker gets a balanced view of the business’s current state.
All in all, we need to realize that banking is a confidence game. If you violate the trust your banker has in you, you will break confidence and the bank will no longer have faith and trust in you and your business’s ability to weather the events that sometimes happen despite our best efforts.