Don’t Keep Your Banker in the Dark
Building a cordial, personal, and positive relationship with your banker will help when looking for a small business loan
About 25 or so years ago, my Dad’s small business suffered from some bad press caused by one of his suppliers. His wasn’t the only business in that industry in our area but he was the only supplier severely impacted by the repercussions of the bad news. Likely because he was the only one willing to be interviewed by the local media about it.
I wasn’t working there are the time, but watched the interview on TV. It felt to me like the media was on a witch hunt and did their darnedest to vilify him and his business (potentially a topic for another discussion on public relations). Unfortunately, I wasn’t the only person to watch the news story—his banker saw it too.
The next morning, much to the chagrin of my father, the bank called in the small business loan he used to purchase his warehouse several years earlier. He had been faithful in meeting his monthly obligations, he had a healthy business, and there was no reason to expect there were any problems—until he went on TV.
We’ve talked before about how bankers are very risk-averse people. Although the dozen or so similar businesses in our area didn’t suffer the same consequences (they didn’t draw attention to themselves by going on TV) he had to spend the next week scrambling to find another loan so he could keep his building.
Over the years I’ve had the opportunity to think about what happened and some of what he could have done to avoid the consequences that could have potentially brought his business down. Unlike his competitors in our area, his business did suffer for a year or two, but fortunately they were able to weather the storm. With the benefit of hindsight, here are a few suggestions that might help your business avoid the kind of challenge faced by his business. I’m convinced it’s critical to foster and maintain a healthy relationship with your banker or other lender so they have something besides the numbers to consider when they think of you and your small business:
- Personally communicate with your banker at least once a quarter: This is a great time to share positive news about your business and where you’re going. If you don’t have a banker who makes it a point to regularly visit you (if you’re like most small business owners, I wouldn’t hold my breath waiting), make it a point to visit him or her at the bank. Don’t be afraid to initiate the relationship. Add him or her to an email list that receives your newsletter, any positive press, or new product announcements. The idea is to get your banker accustomed to hearing from you. It’s likely he or she will appreciate your willingness to treat them like a partner. Most people don’t like to be the person who only gets a call when somebody wants something—your banker probably doesn’t either. If my Dad had fostered this type of relationship with his banker, the early morning call would likely have taken a different tone. “We’re going to call your loan due today,” would have been something more like, “I saw the news last night. What are your plans to overcome the bad PR and how can I help?”
- Invite your banker to visit you on your turf: I’ve talked about why I think this is important before. A few years ago Dana Anderson, who was Kraft’s VP of Marketing at the time, shared the importance of creating an effective environment to foster cross-departmental collaboration. She introduced the idea of having collaboration partners spend time on your turf, sharing with them what you’re doing. She felt like sharing successes was crucial to fostering a positive environment for collaboration. I’m convinced the same is true for your bank and other small business lending partners. Having worked with a banker who made it a point to spend time with us, I appreciate the value of building that type of relationship.
- Don’t forget holidays and birthdays: I know this probably sounds cheesy, but taking the opportunity to set you and your business apart from all the other small business owners he or she works with over the course of the year isn’t a bad idea. I know my small business banker, all those years ago, appreciated the times we went out of our way to do that. You’re likely sending out holiday greeting cards already, so adding one more card isn’t really that much of an investment.
- Don’t ever fudge the numbers: Even if you have a good relationship with your banker, you have to make sure the numbers you share with him or her always jibe. Even a small mistake on a P&L you share with him or her could negatively impact you down the road. Your banker will be much less likely to help you find financing when you need a small business loan if the financial information you traditionally share is riddled with mistakes. Nobody want’s to make excuses for what might be considered sloppiness on your part.
- Don’t make your banker the last to know: When you have bad news, your banker shouldn’t have to hear about it on the nightly news. Instead of letting the grapevine describe your situation, make sure he or she hears your side of the story first. Had my dad spent time fostering a more personal relationship with his banker and thought to share his side of the story before the banker heard it on the news, I believe the suffering my Dad did over the next 18 to 24 months would have been a lot less.
With that said, don’t forget your banker is your banker. Although you want a personal and cordial relationship, he or she is not your clergy, your best friend, or your therapist. Don’t air your dirty laundry. Don’t complain about your business. Never whine or moan about how things are going. Remember your banker is part of the team that makes decisions about you and your business. Cordial, personal, and positive, should be the goal.