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.
“To be a trusted, effective adviser, we need to become a business partner,” says Ralph Papa, chairman, Citizens Bank of Pennsylvania. “We need to understand the business; we need to be involved in developing and modifying some sort of plan for the future.”
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.Keep communicating
Communication is key during any climate, but keeping the lines of communication open becomes of utmost importance during downtimes.
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.
“Most businesses I’ve dealt with, I’ve become friends with, and we respect each other,” Papa says. “I think you have to become friends. You don’t have to see them socially, but the fact is that you have to like them and respect them.”
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.
“My best customers are the ones I’ve had the most contact with,” Papa says. “Those relationships are developed mostly through face-to-face conversations and visits to their business.”
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.
“Banks want long-term relationships,” says Vince Locher, president of the Pittsburgh Region for Huntington Bank. “When a bank feels they can really trust a CEO or CFO and feels that they’re going to be transparent whether the news is good or bad, clearly that will pay dividends in the long run.”
Discussing a vast amount of information will help your banker understand that you respect the partnership and are looking to the future.
While it’s easy to share positive news, such as unexpected revenue, some executives 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.
“For the most part, a business can see through a business if they’re not honest,” Papa says. “If you say all positive things, they’re going to be suspicious, and the same is true about negative things.”
Bankers detest surprises, so ensuring that you are their first line of communication is paramount.
While a banker may not be thrilled to hear of financial shortcomings, he or she will ultimately respect a client who does not hesitate to share important information.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.
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 them what they think of their business: the soundness, is it over extended?” Papa says. “Ask how much they can grow in the economy. And they should ask about worst-case scenarios if the economy continues to go down.”
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.
You may want to also consider attending bank-sponsored workshops or events. These programs can provide valuable information and also serve as networking opportunities between yourself, the bank and others in your field.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.
A popular item is remote check depositing, which allows an employee to scan an image of a check and deposit it instantly to its account from the comfort of the office.
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.
“Many products can be pretty similar in banks,” Locher says. “At the end of the day, it’s about building that personal relationship with your bankers and the whole team of people at your bank.”