Find a bank that believes in your company’s business model

Companies that have built and maintained a strong relationship with their bank are in a much better position to overcome financial hardships, says Rick Hull, Executive Vice President and Regional President at Home Savings.

“Let’s say your business is strong, but you have a bad quarter or even a bad year and you’re showing a loss on your financial statement,” Hull says. “Now it’s time to renew your line of credit at the bank. If you have someone at the bank who is an advocate for your business and has the ability to tell your story to the bank’s credit committee or to regulators, you have a better chance to get the benefit of the doubt. You need someone at the bank who believes in you and believes in your business.”

When those relationships begin to fade and the connection you feel to your bank weakens, it may be time to consider other options.

“When you’re no longer being treated like a prospect or a valued client and you start to feel neglected to the point that you have to pick up the phone and make the call to maintain the relationship, that’s a clue that you should start looking for a new bank,” Hull says.

Smart Business spoke with Hull about how to recognize when it’s time to look for a new bank.

Where do things tend to go wrong in the relationship between a business and a bank?
One potential trouble spot is when your primary contact at the bank is continuously changing. This gets back to the idea of building relationships with someone who can tell your story. If you have to keep bringing a new person up to speed with what you do and how your business works, that’s taking time away from focusing on your business.

Or, your business may not be getting the attention you need because your banker doesn’t understand your business and has no authority to make local decisions, so he or she is unable to advocate for you. You may need a bank that is willing to visit your company, understand your needs and put together a plan that works for you and the bank, then get answers for you quickly.

It also may be that your business has expanded significantly or your needs have changed and your bank doesn’t have the capacity from a capital standpoint to maintain the same relationship that it once had with you.

Change is always going to happen, both in your business and with your bank. When the change becomes uncomfortable for you and/or more than an isolated incident, that’s when it’s time to be concerned.

What’s the best approach to find a new bank?
You want to evaluate your banking situation with some frequency. If you’re going to make a change, you want to be the one driving the change. This puts you in a much stronger position than would be the case if your bank is the one asking you to leave.

In reality, it’s a good idea to have a relationship with two banks. Certainly, one bank will be your primary bank.

But if something goes wrong there, you have the second bank that knows who you are and would be in a position to take your business. This bank might be willing to take a lesser role in hopes that one day it will become your primary bank.

The key is to operate from a position of strength and to not wait until you’re forced to make a move out of desperation.

What materials should you bring when you’re meeting with another bank?
Everybody is going to want to see your tax returns from the last couple years, your profit and loss statement and your personal financial statements. What was your budget last year, how did you perform against expectations and what are you projecting for the near future?

Another key point is that you need to have a succession plan. A majority of privately owned companies in Ohio are owned by people over 60. What’s the future of your business? Your bank should have confidence that you’re going to be there for a while and understand the plan for when you decide to move on.

If you’re open with the bank and the bank is open with you, it’s a good start to a positive relationship for your business.

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