Bank Relationships

Do You Have A Good Relationship With The Bank ?

More importantly, do you need to have a good relationship with your bank?

A good relationship will make the difference between a helping hand, and a cold shoulder when the chips are down.

When things are going well, it will smooth the process of raising money.

So how can you improve this relationship?

As with all relationships,the magic ingredient is communication.

You need to create trust and build an understanding between you, and the manager.

Talking to your bank manager shouldn't be scary. After all, it's something you have to do.

Try To Understand The Bank

First, it helps to understand the bank's viewpoint.

They are in business to make money.

They do this by providing services for which they charge, and by lending money on which you pay interest.

If they don t do this, they don't make money.

Is There A Flaw In Your Business?

So, if a bank manager turns down an application for a loan it may be because they perceive a flaw in the proposal.

Maybe they do not have sufficient confidence the person will be able to repay the money.

Maybe they feel the business is shaky and unlikely to survive even with a cash injection.

On the other hand, it is rarely in a bank's interests to see businesses go to the wall.

Keep your bank manager informed

Be consistent: banks don't like surprises. Sudden lurches up or down tend to make them twitchy.

And customers who fail to keep their manager in the picture, or who don't keep adequate records, tend to be treated cautiously.

Send your manager copies of your management accounts every month.

Being able to see how the money is flowing in and out will help them understand how your business works.

Invite them round.

Invite them to your business premise..

Show them round, and introduce them to everyone.

Give them a feel for how you all pull together as a team.

You'll also be more relaxed because you're on home territory.

When Things Go Wrong

When things go wrong... Don't put off telling your manager in the hope it will all pass over.

Phone them straightaway and ask for a meeting.

Clarify why you want the meeting. Be candid about any difficulties you are facing and explain you want to talk about the best way of sorting things out.

Address problems early.

If you can address problems early and head-on you can often forestall them or find solutions to them.

Your manager's dispassionate advice at this stage can often be invaluable.

Leaving things to the last minute, though, when your back is against the wall, signifies a lack of judgement and pool management control.

Moreover, it significantly reduces your options and the bank manager's.

Provide all the facts

It could be that late payers are proving a problem for you. In this case, give your bank manager an 'aged analysis' of your debtors and creditors, showing what is due for payment now and what is a month or two months overdue.

The bank manager's experience and understanding of the market will help them suggest how best to handle it.

For example, you could take out an overdraft, factor your invoices or just get advice on how to chase debtors.

When things are going well

Ironically, money troubles can be just as bad when things are going well.

You usually need money up-front to fund growth and this can be expensive.

To raise it, you have to ensure your manager has confidence in you and your proposals.

That's where a good business plan is important.

The value of a business plan

Your plan should explain how much money you need, what you need it for, and for how long

It should also include cash flow

Projections to demonstrate how you will service the loan and eventually repay the money.

Business plans are not only for raising finance. They are a vital management tool for you. They help you aim for the bulls-eye and keep the business on target.

At the same time, they indicate to your bank manager that you know what you are doing and are in control.

This reassures him that you can handle any ups or downs in your business. Business plans indicate that you have thought about your business and have a strategy.

They also provide a useful benchmark your bank manager can see you achieving the goals you set yourself.

This will further enhance your credibility when times are tough or booming. Above all be realistic.

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More Than Just Lending Money

Finally, your relationship with your manager is about more than lending money and providing you with their services

They maybe able to offer general advice, and other relevant information, such as grants, and the sector in which you operate, especially, in the local business community.

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