An air-tight bond

An air-tight bond

Features - Business Management

How to build a strong relationship with your local bank.

October 14, 2013
Erin Milam
Industry News

One of the single most beneficial things you can do for your small business is to have a great relationship with your banker. Many small business owners shy away from their bank. They tend to think of their banker as the enemy, as someone who will give you an umbrella as the sun shines and then take it away when it rains. It is that unfortunate view that can be very limiting to a business.

Banks not only can infuse much-needed capital into your business, but they can also help navigate through tough times. They can help you network and refer new clients your way. Many times they have valuable information about things going on in your town that may impact you and your business directly.

So how do you go about turning a bad or non-existent relationship with your bank into a productive one with your banker?

Shop for a bank.
If you currently do not feel you have a good banking relationship, then you probably don’t. Start asking other business owners you trust about who handles their banking and ask them if they would recommend them. 

It is a good idea to find a bank that does business with customers your size. Frequently, aiming for a mid-size bank is a good way to go for small businesses.

Midsize banks will tend to pay more attention to small clients but still will have the stability and capacity to serve you long term as you grow. Small banks are ones that have a single stand-alone branch, mid-size would have multiple branches limited to your area/region and large banks are national.  

Prepare for the interview.
After you have identified two to three potential institutions, you should plan to sit down with them to discuss your needs. Come prepared. Bring your financials, both internal and audited if you have them. Bring any marketing materials that will help tell the story of your company. 

Banks are businesses, too, and the more information you can provide them will give them an added comfort level. You may also want to bring a profile of each person you have in top management roles so they will know whom they are trusting with their money.

Be clear what your expectations are, but don’t go overboard. A new banking relationship is like any new relationship: You don’t want to come on too strong.

Negotiate and decide. Once you have identified your first choice, you may be able to negotiate the terms somewhat. Some banks are willing to do that, some aren’t. But the worst they can say is no, so you don’t have much to lose. Just remember to always be respectful and reasonable with any request.

Next steps.
The most important thing that will keep this new relationship healthy and productive in the future is communication. Bankers can be nervous people. They have given you their money, and now they wonder what you are doing with it and if you will be able to pay them back.

Most banks are going to want to see monthly financials. I would highly recommend sending them even if they don’t ask for them. The more information you can send them about your financial health the better. This includes not only financial statements, but also news releases, new sales, etc.

Banks report the results of their investments to their regulators just as business owners report their results to the bank. If you see a difficult situation coming down the pike, you should tell your banker as soon as possible. Don’t be scared that if you tell your banker some bad news, he will pull the rug out from under you. That is not true. More likely than not, especially if you have kept the lines of communication open, bankers will do everything in their power to help guide you through your problems. But if you wait until the last minute, or worse yet, after the fact, they may have their hands tied and have few options available to help you.

Two key people.
There are two people that the bank needs to have confidence in – the owner and the CFO/controller. The owner provides the long-term vision for the company and is the one that convinces her banker that the company is on a path of growth and prosperity. The CFO/controller is the person that the banker needs to feel has the capability to provide timely financials and accurate cash flow projections as well as strong budgeting abilities.

The more sophisticated the financial abilities are in a company, the more comfortable a bank will feel.

In the end, the success of your relationship all comes down to communication and transparency. Taking the steps to achieve a lasting, productive relationship with your banker may very well be the best thing you ever do for your business.


The author is CFO of HighGrove Partners in Austell, Ga.