Can you look in the mirror and say to yourself that you’ve done all you can to give your bank the comfort and reassurance it might need?
Here are my top pointers on improving your banking relationship:
Keep the bank regularly informed about what the business is doing and invite them in for a quarterly update. Talk them through your business plans and highlight early on any risks or areas where you might need their help. Be confident and enthusiastic, so they will be too. Communication is a two-way street so, if you are unable to develop a relationship and see your bank manager as a trusted adviser, it might be time to look for a different bank.
2. Make sure they “get it”
You know the business inside out but others who are new to it might take longer to really appreciate the products and the benefits they bring to your clients. It’s up to you to make sure the bank “gets it”. If you don’t think they do, then maybe you’re not explaining it as well as you could. Introduce them to others in the business so the bank understands the team’s combined skills set.
3. Be professional
We’ve heard it all before but the banks really do put a lot of emphasis on the management team. If you don’t have a finance director, the owner/manager is often the primary contact so make an impression, be confident, articulate, informed and prepared. The bank is investing in you!
4. Management accounts
In most cases, this is your P&L and balance sheet which is usually a criteria of any lending arrangement. It’s telling the bank how your business has performed in the most recent month or quarter. It could also be your debtors and creditors schedules, so check with your bank and don’t break those covenants!
5. Financial forecasts
Always show you are on top of your numbers by preparing rolling forecasts. At a minimum, these should show your sales, profitability and particularly your cashflow, key debtors and creditors, and a short commentary. Have further detail if the bank wants to see it and remember that if you’re looking for funding or a change in your account facilities, you’ll need the detail to be robust and up to scrutiny. This will provide early warnings to the bank and prevent last-minute phone calls when a key customer still hasn’t paid and you have to make payroll.
6. Beat your numbers
The single most important thing that will breed confidence in your business is to make sure you beat your targets! Anyone can paint a rosy picture of imminent success and glory but if, after three months, you’ve spent the £100k loan, hit only 25 per cent of your sales targets and pipeline is weak, you can expect some very tough questions. Make targets achievable and deliver on them!
7. Address risks in advance
Put yourself in the bank’s shoes and think critically about the key risks to your business plans and/or what the bank might perceive as the biggest risks for them. Outline these ahead of time and prepare responses and actions that would mitigate the risks. Give confidence that if these risks materialise, you can deal with them.
If you do all of the above, you’ll have a great working relationship with your bank manager, they will build up trust in what your business does (and vice versa!) and in your forecasts, so that any discussions about further lending or other products are easy ones.
Chris Chapman is founder and managing director of www.mybusinessFD.com
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