Working with your Bank

It is impossible to run a business without a bank account; and, it is very difficult to grow your business effectively without the support of a good bank. However with the drive towards improved profitability and efficiency many banks have reorganised in such a way that penalises small and medium sized businesses by assigning their most junior managers; with no industry or sector focus – hundreds of businesses to “manage” and “support”. The result is that these managers have limited time or sector knowledge to add value to your business.

To get the best out of your bank it is imperative that you develop a relationship with the person responsible for your account – this means:

• Make him/her your friend (remember he was human before he became a bank manager) – develop a mutually beneficial relationship with your bank manager. Invite him to networking events where he may pick up additional business. Have lunch and tell him what you are up to (don’t know what to say? – see below). If you feel your current (or prospective) bank manager is not an individual that you can develop this type of relationship with, consider moving branches or even banks to find the right individual.
  
• Communication – tell him about:
  • Your aims and objectives – where you see the business going
  • Make sure he understands your business model
  • Your successes – big new client wins, press appearances, anything that gives an indication as to how well you are doing
  • Issues – (with issues you must try and communicate before the event) e.g. you are trying to decide how to finance the next big job, you are concerned that a client may pay late and you may need to go overdrawn, etc.
    
• Professionalism – You must aim to project a professional image. You never get a second chance to make a first impression. If you go in with sloppy plans or unrealistic expectations, your bank manager will continue to expect that level of competence (even after you have smartened up). Get advice before applying for loans / overdrafts – to ensure:
  • That your case is valid
  • That you are able to respond to all their concerns effectively
    
• Regarding advice – Talk to Platinum, business colleagues, your accountant or other advisors, network tirelessly… the opportunities for getting advice will only be limited by your imagination.
  
• Put yourself in your banker’s shoes. Banks are not charity. They can only lend when they are completely comfortable that – all things being equal – they will get their money back. Therefore they will be looking for evidence that you will have the revenue to repay AND (just in case something goes wrong) you have collateral to cover the loan.
  
• Get informed:
  • Know what other banks are offering to similar businesses.
  • Know what the lending criteria are so you have realistic expectations.
  • Know what the other valid alternatives are: e.g. Small firms Guarantee Loan Scheme, Grants, Community Development Finance Institutions, Private Equity, etc.

If you are not getting attention and engagement from your bank manager at normal times – it is less likely that you will get a great deal of support when you need help – particularly if the help you need requires the bank to flex their normal approach a little.

When you require support from a bank that has little knowledge about your business – you must have a very good story to tell (usually by way of a business plan) and good figures (showing how the project still works in alternate scenarios). You must support this with management information and accounts that demonstrate good performance. If you find you have little or no time for preparing this information (or for ensuring your company’s financial information will be attractive to finance providers in the future); see our new “Virtual Finance Director” service just launched this month. If on the other hand you are considering switching banks see the Useful Information article on Comparing Banks to find out which one would be the most cost effective for your business.

Wishing you every success with your business.

Disclaimer: The information in this article is for obvious reasons generic in nature. You are advised to seek professional advice before implementing any of the above.

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