Go on, admit it: you hate seeing your bank manager. Having invested the proverbial blood, sweat and tears (and quite possibly your own worldly possessions) in your company, the idea of going cap-in-hand to see a cold, uncaring bank manager, just so you can pay this month’s wages, naturally doesn’t sit well – especially when you’ve read countless stories about bonuses akin to telephone numbers being given to bankers.
The bankers, on the other hand, have had their knuckles wrapped at best. At worst, they’ve had substantial lending powers taken from their control and have been transferred into a “no lending” safe zone!
How can this business-critical relationship be mended?
Here are some points for both sides to consider.
Tips for business owners:
- Remember: it’s not your banker’s fault your business needs funds
- The bank is a business, just like yours, and has to make profit
- Banks lend against security. Your value of security will not be the same as theirs
- Don’t expect quick answers. All funding decisions, except very low level ones, now need approval from credit
- If you don’t believe in your business, why should your bank?
- Set realistic targets. Banks have seen every hockey-stick projection every produced
- Always leave yourself some head-room. Coming back for second tranches is never well regarded
- Manage and measure your covenants like a hawk
- Tell your bank manager the good, the bad and the ugly before it happens
- Don’t be afraid to negotiate but don’t burn your bridges
Tips for bankers:
- Don’t forget the entrepreneur is probably doing all they can do to run the company and is probably worried sick about the future. Listen, listen, listen
- Don’t force the entrepreneur to buy products they don’t need and can’t afford (such as key man insurance)
- Offer business owners online banking
- Ring them up and ask how things are going – and not just when you see their overdraft is at its limit!
- Help them network with other relevant customers
- Understand how their business works and support relevant investments in cap X requirements etc
- Tell them how they can improve their credit rating and perception with the bank
Jo Haigh is head of FDS corporate finance services. Jo can be contacted on 01484 860 501/07850 475 878 or email@example.com
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