Opinion

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You and your bank manager

4 Mins

The relationship between a business owner and his/her bank manger is an interesting one. Both sides tend to see themselves as the most important player. 

Any good business relationship is based on a number of key principles: 1) honesty 2) trust 3) win win

Of all these three items, trust is – without doubt – the hardest won and easiest lost and yet it’s probably the most important. Trust is broken for lots of reasons but here are some of the main reasons to be aware of so take note, as they apply to both sides equally.

1) Over promising and under delivering

2) Disrespectful behaviour

3) Undermining the other side

4) Not accepting responsibility or blame

5) Using threats to win a point

6) Deliberately lying

There are a few specific things you can do to start off on the right foot or to help repair a damaged relationship. 

1) Come clean asap if you have done any of the above

2) Provide tangible proof that you won’t do it again 

3) Be consistent 

The funding market continues to be fragile at best and it’s set to be so for some time, so it’s very important to protect and preserve what you have (and yes that does apply both ways, as the funder should be keener than ever to retain his good customers). 

If, on the other hand, you sense that your funder is looking for reasons to exit, there are two very different approaches, each with quite different risks attached to them. 

High risk:

Make it impossible, if not very expensive, for the funder to exit. In simple terms this means you have borrowed so much they have now no choice but to stay in the game to have any chance of exiting with any value. This may mean they actually have to lend you more initially! This will be very unpleasant all round. At best, it will involve 1,001 covenants that are likely to be akin to personal asset stripping in appearance BUT it may buy you the time you need. 

Low risk:

Take a pre emptive step. Go to your funders and fully acknowledge the issues but do so in tandem with a well thought-out remedial plan that should include:

a) Substantial personal sacrifice (be it salary, cars or benefits).

b) Alternative funds, friends, family, assets, sales, creditor support, debtor pressure, destockings. 

c) Evidence you have already started on the above (ie: this isn’t just lip-service).

d) Debt reschedule suggestions. 

You will have to face large fees if the bank supports you through this. For example, monitoring fees will almost always be a given and you may even have to sacrifice some equity in exchange for the support. But it may just keep you in the game.

So finally: it’s obvious the real way of handling this relationship is not to let it get into a bad place in the first place but, should this happen, a word from the wise; do not let it fester. Action is essential as soon as possible.

You can contact Jo at Jo.haigh@corpfinservices.co.uk or call her on 01274 868 958. 

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