Just got off the phone with a very nice person who has been running and growing her business for over ten years. Their existing banker, who has a poster promoting their Small Business services, said they haven’t lent money to small businesses in quite a while, but they would be happy to lend them money personally. Huh?
Another banker (well, my banker, the one with the red and white logo) is busy figuring things out on how to lend more money and structure financing packages that help his clients (and my clients) grow their businesses and be more successful. That’s why I refer clients and business owners to my banker.
Here are the signs of a good banker:
- You know what he or she looks like. Their name plate isn’t on a sticky note on the wall. They’ve been there a while and aren’t on a two week rotation through every seat in the place.
- They know what you and your business look like because they’ve visited you at your office/shop/store.
- Most bankers are recommenders with final decisions made by credit departments in other cities. That’s normal. However, your banker should be giving you proactive advice on how to structure your loan application to maximize your chances of success.
- There are two kinds of bankers: lenders and collectors. Hopefully, yours is a lender. If you’re stuck with a collector who is cleaning up the department because someone on the other side of the country had a bad experience, it’s time to find another bank.
- Different banks have different levels of enthusiasm for certain industries and economies. Does your bank like your industry? Some do, some don’t. Don’t take it personally. Just find the bank that likes your industry.
And, here are the signs of a good client (according to my banker friends):
- Business owner runs the business like a business, not like a hobby. That means that the owner is on top of the numbers, understands and uses monthly financial statements, knows gross margins, break-even and cash flow, has a marketing plan, and is focused on profitability more than growth at any cost. The title of ‘Owner/manager’ means that the owner can manage. Management is one of the banks top criteria for lending decisions.
- Strong historical financial performance. Financial statements are produced by a credible accounting firm in a timely manner. Differences between internal statements and accountant prepared statements are minor. These are also evidence of good management (see point 1.)
- Good cash flow management. There is a balance between growth, profitability, cash reserves and good debt (the kind that helps you make more money).
- The ability to plan and the discipline to stick to the plan. Having some parameters and focus around your direction can help you be more successful. In fact, there is research that shows only about a third of businesses have a formal plan, but the third that does plan outperforms the two-thirds of businesses that don’t plan. Knowing in advance what your plan for capital expenditures on equipment will give you more negotiating power on purchasing and more flexibility on financing.
- Treating your banker like a strategic partner and requesting their input and suggestions into major decisions to optimize financial structures and minimize your cost of borrowing.
- Proactively communicating with your banker – both good news and bad news.
- Treating the relationship like a win-win-win-win because it is – you’re both on the same team and want the same results.
Interest rates are at all time lows. Debt can be an inexpensive way to grow your business provided that you are structured to meet the banker’s requirements for financial reporting, planning and good management…and these are all positive things for business owners.
