Please advise Featured

7:00pm EDT November 24, 2006

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 or (248)386-9860.