Balance of power Featured

8:00pm EDT July 26, 2009

You’ve probably met with your executive team and members of your staff to devise ways to weather this economic cycle on sound financial footing. But you may have forgotten to invite a key player to the table: your banker.

Whether you’re seeing red or thriving during this volatile time, it’s always helpful to ask for input from an outsider. Now is the time you should be thinking beyond just the products your bank offers and see your banker in the role that he or she aspires to be — your trusted adviser.

“In a downturn, a good commercial banker will be kind of a consultant, a sounding board, an adviser and, really more than that, a fount of experience for a customer of a bank,” says Frank Gwynn, senior vice president and manager of middle market banking for Union Bank in Northern California.

Many businesses don’t think to communicate with their bank on a regular basis, which means missing out on a valuable, free resource, according to industry experts. Think of your bank for ideas and solutions for efficiency, especially now when you’re probably looking for answers.

To take advantage of your bank’s true role as a consultant, you must start by forming and maintaining a strong relationship around trust and communication.

Introduce yourself and your business

The first step in using your banker as an adviser is allowing time for him or her to get to know you and your business. Even if you’ve been partners for decades, invite your banker to your office or place of operation for a meeting.

While it’s important for the bank to learn about your operations, over time, it’s necessary for you to return the favor. A good relationship banker will introduce you to managers and key decision-makers in the bank, but if the introductions aren’t offered, take the initiative and ask for a meeting. The more people you know at the bank, the more likely your company will become a household name, the more likely you’ll know who makes the decisions and how they’re made and the more likely a smooth transition will occur if your contact leaves or is promoted.

“You don’t want to just know one person at your bank,” Gwynn says. “You want to know maybe that person and his manager and maybe even one level above so that you become institutionalized. How you do that is you invite those folks out for a meeting to review your plan, you play golf, you go to lunch — you do things socially together to build a rapport with some people at the bank that can be key to your future.”

Once the initial contacts are made, work to maintain those relationships with open and candid communication. Ask your banker how often he or she wants to hear from you. Is it once a month or once a quarter?

If issues arise in the meantime, don’t be afraid or intimidated to call your banker. One thing all bankers will tell you is that they hate surprises — both good and bad. The more they understand your financials, strategic plan and any changes in the company’s overall operations, the better they’ll be able to provide products and solutions to keep you on the right track.

“A strong relationship is key to building a mutual trust and working knowledge of the business, which enhances the bank’s ability to help clients run their business more efficiently and effectively,” says Emily Shanks, senior vice president and commercial banking/marketing executive, Bank of America. “Strong relationships are built on such things as open and frequent communication … regular and timely feedback, and candid and timely disclosures of important information by both parties.”

Use your bank for regular counsel

Like your lawyer or accountant, use your banker as a true consultant. Whether you’re trying to stay afloat or even rapidly growing, your bank can help in navigating through this economic downturn and in planning for the future.

Once you’ve established a relationship and your banker understands your business and your industry, ask him or her to review your business plan. It’s one of the best ways to utilize your bank’s resources. And if you don’t have a plan, create one.

Your banker has a true advantage of having a national, regional and industry-specific perspective on economics.

There are a number of questions about your plan that you should be able to bounce off of your banker.

“One is, is my plan consistent with what the bank sees with other industry research,” Shanks says. “Can the bank provide any peer analysis or benchmark comparison as to how my peers are performing?”

Others include: Are the assumptions of your business plan reasonable for the current economic environment? How can the plan be improved? What type of contingency plan should be in place? And finally, what products and solutions can the bank offer to help meet your company’s needs?

Take advantage of products and services

At least once a year, you should sit down with your banker to review the products you’re using. Perhaps you’re paying fees for a product you rarely use or technology has advanced and greater efficiency can be had.

A relationship review with your bank can help you tackle ways to save money and save time.

“For example, there are ways we can help companies reach their cash sooner so they can pay their bills sooner or to keep their cash longer,” Shanks says.

Among the popular products for cash flow today is the rapid deposit solution, a desktop scanner that allows you to automatically deposit checks into your account.

“Fraud protection right now is probably one of the biggest things that a company needs to be looking at,” Shanks says. “The current environment has increased that significantly and many companies don’t think about it.”

While you might be thinking short term, ask your banker about options that will help you now and in the future. Interest rates have dropped — perhaps you can capitalize on a new loan or refinance. Discuss with your bank how long you’ll need to borrow and how much money you’ll need to borrow to structure a plan and lock in fixed interest rates while they’re low.

“In a down economy, looking ahead two or three years, what we might all see is the fear of inflation and much higher interest rates perhaps coming a couple of years from now,” Gwynn says. “You would want to work with your bank now to structure a plan so you have some visibility for the next several years.”

But once again, banks seek to be an adviser. Some banks offer seminars and informational Web sites as additional resources to finding efficiency. And many banks, if you’ve maintained honest communication with them, will honor your need for them to be flexible and will be committed to providing sound advice.

“(Some companies) maybe for the first time are going through a downturn or maybe the second time in their careers,” Gwynn says. “So the smart ones, the ones that I think are approaching it correctly, will say, ‘Yes, I’d like to get the experience of anybody that can help me think my way through this and give me valuable feedback.’”