Tuesday, May 10, 2011

What Makes Your Banker Tick?

It is unfortunate that business owners frequently consider their lender an adversary rather than a team member. Mark Twain once wrote ‘A Banker is a fellow who lends you his umbrella when the sun is shining and wants it back when it starts to rain.’ In today’s world banker jokes are probably second only to lawyer jokes.

In this article, I would like to suggest that business owner’s reconsider this common attitude toward banking and, instead, consider the benefits of treating your lender as one of the members of your management team.

One of the first steps in building strength in your lender relationships is to become more knowledgeable about bankers in general. To this end, you might consider reading the book ‘The Small Business Insider’s Guide to Bankers’. This publication does a nice job of providing a synopsis of how the banking industry operates, how to speak the banker’s language and how to turn your banker into an advocate for the growth and success of your small business.

Uneasy relationships, with a lender, can be traced back to:

• Business owners who do not understand the most basic facts about the business of banking.

• Using the wrong bank or the wrong financing

• Failing to understand the four P’s of a perfect loan proposal and what it means to ‘package’ a loan.

• Failing to understand what makes your business ‘bankable’

• Failing to understand your commitments and the implications of resenting your lender’s requests for information.

• Not valuing a long-term relationship and how it can impact your survival as a business.

• Turn-over in the banking industry and the need to continually nurture new relationships

Following are five positive steps you can take to improve the relationship with your lender:

1) Consider reading ‘The Small Business Insider’s Guide to Bankers’ to learn more about why and how your lender does business.

2) Invite your lender to visit your business and help him or her gain a better understanding of your operation.

3) Provide your lender with accurate, timely financial information. Not only is it a good idea to have this information for internal use, it is also a condition of your loan commitment to the lender.

4) If you want to communicate more knowledgably about your financial status, consider the Profit Mastery Program offered through the Small Business Development Center.

5) Do not blind-side your lender. Be sure to keep your lender informed of critical issues affecting your business.

If you need assistance in the development of a loan package or would like to explore the Profit Mastery Program, you can access services through the Small Business Development Center in Longview.