Your partner in finance Featured

7:00pm EDT January 29, 2008

It’s hard to overstate the importance of establishing a personal relationship with your banker. To prosper in an increasingly competitive marketplace, it is crucial to have a dedicated banking partner who is intimately familiar with your needs and who can provide the proper financial resources to successfully expand and profitably grow your business.

The best way to establish a strong bond with your banker is by meeting with him or her, face to face, on a consistent basis. “Meeting with your banker every 90 days is very appropriate,” says Ray Boyadjian, senior vice president, group manager of Comerica’s San Fernando Valley Middle Market Group.

Smart Business spoke with Boyadjian about establishing a personal relationship with one’s banker, how to prepare in advance for meetings and what should be expected during performance discussions.

Why is it so important for business owners to establish a relationship with their banker?

One reason it’s important is because the business owner should want someone who really cares for his business and has a genuine interest in the progress of the business. Also, a personal relationship puts everyone at ease to share information without hesitation. An open relationship helps the banker to respond more proactively to what may happen downstream. Let’s say a company is in a positive cycle and has needs for increased credit facilities. By freely and openly sharing information, the entrepreneur will enable the banker to take a proactive approach in meeting the needs of the business. It is also important to share concerns with the banker if company management anticipates that the business will be going through some challenging times in order for the banker to participate in finding solutions and strategies.

How should business owners prepare in advance for a meeting with their banker?

The business owner should have in mind the entire key issues that concern the business. Key issues can be positive; for example, the company may be experiencing an unusual amount of growth and, as a result, management may need a larger credit facility. On the other hand, key issues can represent challenges; maybe a company may be expecting a cash flow crunch due to an economic downturn. Business owners should be aware of all key issues — both positive and negative — prior to meeting with their banker so they can have a brainstorming session and address such challenges. The essence of the meeting should be the ‘well-being’ of the business.

What type of information should be brought along?

Most companies are required to do reporting on either a monthly or quarterly basis and this information should be provided to the bank in a timely manner. It is important for business owners to be aware of their company’s performance. Financial statements will tell a story about the performance of the business. If the information provided to the bank suggests that profit margins are shrinking, the business owner should be well informed of this development and come equipped with answers and the underlying reasons. This puts the banker somewhat more at ease because he or she will perceive the business owner as being on top of things and addressing issues appropriately. The best thing business owners can do is analyze their company’s financial statements and understand exactly where their strengths and weaknesses are as well as the underlying reasons.

Who should be present at banker meetings?

If financial matters are comprehensively addressed in the meeting, it is helpful to have the business’s owner or CEO of the company as well as the CFO present. Some companies, such as those in the manufacturing sector, should also have the COO or general manager present on an annual basis. With manufacturers, a lot of things can be impacted if their processes are not synchronized properly, so the COO or general manager should attend banker meetings at least once a year, while the owner or CEO and CFO should attend quarterly, if possible.

What should be expected during performance discussions?

During performance discussions, it is very important to know where the company is versus its projections. If it is on target, that is great. If it is ahead of the target, then management should be able to explain what the contributing factors are. If it is behind, it is important to know what the causes are.

It is also important to anticipate what will happen next year and why. Bankers would rather not see much deviation from the original forecast. There are two things to which they always compare the numbers. The first is past performance: What is happening this year compared to last year? The second is projections: What is happening this year versus what the company said would happen? If a company gives a rosy forecast year after year but fails to meet its target, then the credibility of its forecast becomes questionable. You want to make sure there is integrity and reliability behind numbers. <<

RAY BOYADJIAN is senior vice president, group manager of Comerica Bank’s San Fernando Valley Middle Market Group. Reach him at (818) 379-2926 or