How to Impress Your Banker

Finding money to finance and grow a business can be challenging. Expansion often means having access to more money to take advantage of upcoming opportunities or unavoidable setbacks. Traditionally, bank financing is an entrepreneur’s most accessible funding source but given the experience of the early 90’s when the recession took a toll on business, banks tightened their loan approval process and increased their security requirements. Banking is a high volume business operating with low margins and therefore a low risk tolerance. Be aware of the following strategies for ensuring a healthy banking relationship:

• Have a business plan and discuss it with your banker on a regular basis. Be sure to include a marketing plan, an operating plan, a management profile and a financing plan, which will demonstrate the profitability and stability of the company. Lenders will not lend on image alone. All of this documentation is required to address any concerns about the ability to meet financial obligations.
• Measure actual results against plan on a timely basis and use key financial ratios to measure performance.
• Prepare a cash flow budget and update it monthly. Ensure that cash flows in quickly and cash flows out slowly using credit provided by suppliers wisely. Identification of cash needs earlier will help to develop a sound negotiating position with the lender. Do not wait to visit the lender when the business needs money the most. Never asking for money when you need it pays off as planning more actively will nurture your banking relationship by emphasizing your credibility.
• Have regular meetings with the lender regardless of whether there is a current borrowing facility in place; invite them out to the premises.
• Report any bad news to the lender before they hear it from someone else. Lenders faced with surprise problems tend to reduce credit or call loans usually at times when needed most
• Always make payments on time. Should a late payment be unavoidable, advise the lender as soon as possible and provide a planned solution.
• Use other non-banking facilities offered by the lender like payroll services, credit card facilities etc., if they meet the needs of the business.
• Seek professional advice when needed. Professionals will enhance the presentation and keep it focused on the same areas that the lender is interested in.