Establishing a good relationship with your banker is beneficial to your business because a bank can be a source of ideas to improve your company.
“Think of your banker as an extension of your team, just as your CPA or attorney is part of your advisory team,” says Susan D. Steiger, vice president, commercial loans for Lorain National Bank.
“When we come out to see you, we don’t have the meter running. It’s part of our job to spend good quality time with our clients. We don’t send you a bill at the end of a meeting, so it’s something you should take advantage of,” she says.
And if your banker understands your business, he or she can bring you ideas that make your life easier.
Smart Business spoke with Steiger about how to establish a better working relationship with your lending partner.
How should business owners get their bank involved as they consider making investments?
Get your banker involved early when you’re weighing any kind of investment. Ideally, we’d like to be the first call when you have a major strategic move to consider. Whether an acquisition, buying out a partner or making a capital investment, it’s always better to start the discussion sooner rather than later.
Use us as a sounding board, bounce ideas off of us. We may have advice on structuring the deal or may have seen similar situations with other clients, so use that experience to your advantage.
On the other hand, you may be a nonborrowing client who doesn’t anticipate a need to borrow; maybe you’re just using the bank’s treasury services. It still is wise to begin a regular dialogue with your banker; the relationship ideally should be established before you have a borrowing request. Invest the time to educate your banker about your business, your markets and your industry — it will pay dividends down the road.
What else should a business owner expect from a banking relationship?
You should expect to have access to multiple levels in the organization. Make sure your banker is introducing you to others, especially top management. Your banker is your primary point of contact, but he or she is only one person and no one person is calling all the shots. Others at the bank are part of your team too, and you’ll benefit from everyone’s experience. Interaction with all the bank’s decision makers will pay dividends when your next credit request goes before committee.
We can also connect you with other valuable advisors. It’s our responsibility to introduce you to others, both inside and outside the bank, who have relevant experience. It might be for treasury management, investments or estate planning solutions, or tax advice — we can give you access to those professionals.
When is it a good time to talk with your banker about problems?
From the get-go, be forthcoming with information, both good and bad. It just is not a good practice to surprise your banker. When something happens seemingly out of nowhere, it raises red flags. We need to know if you’ve just lost a major customer, your new product launch is delayed or you’re in danger of tripping a loan covenant.
It’s a banker’s job to understand your business, and we know things don’t always go as planned. It is much better to deal with it as soon as you know about it because then we can help plan and strategize the next steps. Remember, we’re your advocate inside our organization.
Positive news often requires advance planning, as well. So let us know if you have just landed a major contract or are in negotiations for the purchase of a new warehouse.
How often should you be talking with your bank?
Your banker should be scheduling annual reviews with you. If not, then ask for it. This annual review is part of keeping the lines of communication open, but it also serves as a more formal process to review your year-end financials and the outlook for the coming year as well as to discuss any other needs you might have. But certainly meet with your banker quarterly, if not more frequently, on a more informal basis.
Also, get the other key people at your company involved in these meetings. Banks like to see that you have bench strength on your team and that the whole business isn’t being carried on your shoulders alone.
How crucial is it to negotiate rates?
Price isn’t everything. It is not necessarily the best strategy to negotiate every rate and price down as low as you can go. In the long run, if your banker is forced into that kind of relationship, when things get tough, he or she may not have the staying power to maintain the relationship. The financial relationship has to be a win-win. If the company is doing all of these things to foster a good relationship, it is going to get competitive pricing over the long haul.
I think it’s often frustrating for owners or managers to deal with the bank. They just would rather not do it or would rather delegate it to someone else, perhaps their controller. But that interaction is too important to ignore. The success of any relationship — personal or professional — always comes down to communication; it is the most important variable.
We are people and we are in a people business. Communication over time builds trust, and mutual trust is at the core of any good relationship. Everyone pays lip service to it, but it really is the key.
Susan D. Steiger is vice president, commercial loans for Lorain National Bank. Reach her at (330) 655-1824 or [email protected].
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