Please advise

With a banker on your side, your
business has more leverage to
grow, provide new products, expand into different services, reach
new customers — succeed.

Of course, your banker must know
where your business is headed before he
or she can provide the resources you
need to build a strong company. These
honest conversations result in stronger
relationships, says Craig Johnson, president and CEO of Franklin Bank in
Southfield.

“If you want your banker to be your
trusted adviser, you have to trust your
banker,” Johnson says. “And by trust,
you have to tell him the good, the bad
and the ugly. Most bankers are willing to
work with a client that tells them the
whole story — even if it is bad — much
more than dealing with someone who
hides things.”

As trusted advisers, bankers can share
critical business information: How might
economic trends affect the company?
What financial trends shape how the
bank makes decisions? What solutions
can the banker provide if the institution
cannot fulfill your project requirements?

Chances are, you trust an accountant
and lawyer to guide you toward sound
business strategies. Your banker completes the trifecta of advisers that all
business owners need. Smart Business
asked Johnson what other information
and advice a bank can offer.

Why should you engage your banker in the
same conversations you have with an
accountant or lawyer?

Often, business owners are so focused
on their own industries and individual
businesses that they do not view the
economy as a whole. A banker has
access to various market information.
Banks can give you a flavor of what
trends we notice in the market, in general. Also, banks interact with lots of different business owners, so we can offer
insight on how other professionals
weather bad times and take advantage of
opportunities.

How does specific financial market knowledge position bankers to advise business
owners?

Banks go through cycles like any business. If you have a strong relationship
with your banker, he or she will be honest about the bank’s stance on certain
financial risks.

For example, say you want to invest in
residential land development, which is a
loan that is a bit difficult for banks to get
their arms around now because of
today’s housing market. A banker who is
a trusted adviser will be honest with
you. Perhaps he or she will explain that
the bank is taking a conservative look at
these loans. Then, a good banker will
offer alternatives — maybe grant the
loan, but require more equity or greater
controls.

The point is, your banker should clue
you in about issues the bank is dealing
with that affect your ability to fulfill
business goals; in this case, obtain a residential land development loan. Of
course, this is just one example. In general, your banker can give you a laundry
list of alternative products that are more
attractive at a given time because of
market trends. Just require your banker to always offer options. Your job, then, is
to keep an open mind and listen candidly to suggestions that could help your
business.

What happens when lawyers, accountants
and bankers collaborate?

That doesn’t happen often enough.
Business owners usually meet with their
bankers, accountants and attorneys several times throughout the year. But most
of the time, if not always, those meetings
are separate. It’s a good idea to sit down
once each year with all three advisers.
Have an agenda and talk about your
business, where you are, and your goals
for the coming year.

Each one will bring its own perspective.
If you are discussing a new project, the
attorney can give you perspective on legal
ramifications. The banker can talk about
lending alternatives, and the accountant
can address tax benefits. Collectively, you
can weigh pros and cons and structure a
plan that will mitigate risks to your business. Generally speaking, if all three advisers can reach a consensus on an issue,
you will have a better opportunity for success because they were involved early in
the planning process.

How can a business owner determine if a
banker will truly serve as a trusted adviser?

In most situations, a banker will be a
trusted adviser as long as the business
owner reciprocates. If you only give your
banker the good news and you sugarcoat
the bad, your banker will never be your
trusted adviser because his or her job is
to protect the bank. This is why it is so
important to engage in open dialogue.

Over time, if you are honest, you will
build a trusting relationship. Your banker
will respect your honesty and will work
with you through the hard times.

CRAIG JOHNSON is president and CEO of Franklin Bank.
Reach him at [email protected] or (248)386-9860.