Balance of power Featured

8:00pm EDT July 26, 2009

Chances are you’re feeling the pinch of today’s economy in ways you never expected. With the recent banking crisis, you may be hesitant to share your worries with your bank for fear that it may see you as a risk. And your concern may be well-founded, as more than 40 percent of banks reported a reduction in credit lines to small businesses, according to a survey by the Federal Reserve.

But now, more than ever, is the best time to buddy up with your banker to develop a strong relationship that can help pull you through hard times and can ultimately save you money.

Forming a partnership with your banker makes sense, as you both share a common goal: the financial strength of your business. By talking candidly with your banker about all aspects of your business, you bring a financial expert to your inner circle of decision-making. Along with your accountant and attorney, your banker can help you streamline efficiency and keep you on the track to financial soundness.

“We play a role as a financial adviser, whether in a good economy or a down economy,” says Mayling Exposito, director of business and corporate lending, Great Florida Bank.

“And now, it’s more important than ever to try and build those relationships and try to explain that we can help their business survive these times.”

When you make time to talk with your banker regularly, you ensure that you receive the best services possible as well as the advice you need to keep your company running smoothly — even when the economy is bumpy.

Building blocks

Communication is key during any climate, but keeping the lines open becomes of utmost importance during downtimes, says Lisa Gonzalez, business and community banking executive for South Florida, Regions Bank.

“The mutual communication is very important so that a bank can learn more about the business and better assess the financial needs of the company,” Gonzalez says.

Like in any new relationship, those first discussions can feel a bit awkward. But each time you sit down with your banker — whether during a quarterly meeting or through a monthly phone call — it becomes more of a friendship. The most basic way to begin building the relationship is by inviting your banker to visit your business, so that he or she can visualize your passion.

“We like to play a very consultative role,” Gonzalez says. “It’s not like back in the day when the banker sat behind a desk and you just came. We like to take a more aggressive approach, where we like to go out and visit the business and understand it.”

From the onset, you must convey to your banker a sense of openness and eagerness to discuss the various aspects of your company. Additionally, there should be an understanding that both sides are in it for the long haul, says Jarett Levan, president and CEO, BankAtlantic.

“The banker has to demonstrate to the business that they know about their business and care about their business,” Levan says. “The business owner needs to demonstrate to the bank that they want to create a partnership and a relationship. Both parties need to understand and believe that there’s a long-term relationship that can be established.”

Discussing a vast amount of information will help your banker understand that you respect the partnership and are looking to the future.

“We want to know the good, the bad and the ugly,” says Exposito.

While it’s easy to share positive news, such as unexpected revenue, some business owners may find their heart racing when they think about telling their banker that a major account is hovering near bankruptcy. However, discussing matters quickly and honestly can pave the road to an amicable solution. Bankers detest surprises, so ensuring that you are their first line of communication is paramount.

“When you find out something by surprise — when you read it in the paper or get a letter from an attorney — now your banker feels like you were hiding something,” Exposito says. “There’s a better chance of working something out if we would have known upfront.”

Maximize the relationship

With a trusted adviser on your side, you can work together to develop a plan to prosper. To make the most of the partnership, go over your business plan together and discuss how to improve efficiency. Even if your company is thriving, you can always benefit from the sound advice of a financial professional who can help you look to tomorrow.

From there, you can analyze the effectiveness of your current plan and figure out what changes you could make to improve your overall success.

As a CEO, it’s your job to update the bank on any changes in your industry. Your banker can then help you plan your next best step, whether it be trimming costs or planning an expansion. It’s also a good idea to ask for your banker’s opinion on how you can take advantage of the low interest rates offered today. Refinancing may lessen your payments and free up cash for other investments.

“They should ask their banker how to make themselves financially stronger,” Gonzalez says. “The customer should want to know, ‘How can I streamline my payroll process? How can I pay my suppliers faster? What are others in my industry experiencing?’”

Once you have a relationship with a bank, it may be tempting to shop around for additional services. However, remaining loyal to one bank for a variety of products — even when you could get a slightly cheaper price elsewhere — may actually save money in the long run. When a company has a variety of services throughout different departments of the bank, that company becomes a household name inside the bank and may be considered for special offers.

“Trust and loyalty has benefits on both sides, and overall, you’ll get better pricing,” Exposito says.

Find the right products

Banks today offer more services than ever before, and tackling the list on your own can be overwhelming. Once your banker understands your company, he or she can assist you in selecting products and services that can streamline your workday and improve your bottom line.

“Banks typically provide services that can then create efficiencies in any economy, such as remote deposits, where the business customers can deposit an image of their checks directly from their place of business,” Levan says. “Also, the use of online banking or cash management solutions can save money.”

Though some services have a fee, the benefits can outweigh the costs. For example, compared to traditional check depositing, remote deposits can save time and money by eliminating the need for an employee to drive to the bank.

In today’s market, cash is king. Products are available that can maximize your cash flow. Your banker can also provide advice on the best use for additional money — such as investments or paying down loans.

With the nature of banking constantly evolving, a business must trust its banker to match the business with appropriate products. A company should review its banking products annually to stay fresh on the offerings.

“We shouldn’t just be a product pusher and sell everyone everything that we have,” Exposito says “A good banker is one who analyzes the company and sells products as they are needed.”