THE BANKING RELATIONSHIP
While most acknowledge that they do deal with a bank or several financial institutions, it is interesting to note that a significant percentage of these owners do not know who their banker is or whom they would approach should there be a need for financial advice.
Most owners initiate a bank relationship (note my reference to bank and not banker) for one of two reasons, a place to put money or a place to get money. Typically the “relationship scenario” is quite simple: business borrows money– business succeeds–business pays back the loan. That’s it until another financing need arises. It is unfortunate that during this interim period, business owners often miss a significant opportunity to establish the cornerstone for an ongoing working rapport with their banker. They overlook the fact that this initial transaction can and should be the catalyst to building a mutually rewarding relationship, extending well beyond simply being a name or number to each other. If this describes your situation, it is never too late to change. Choosing and developing a banking relationship can be accomplished with several simple steps.
Having been involved in business banking for over 15 years, I have had many opportunities to speak with existing and aspiring business owners on the subject of banking; more importantly, the longterm value of establishing a banking relationship.
Firstly, find out which financial institutions have demonstrated a long term understanding and commitment to your industry. This can include an appreciation of the cycles that occur in
your industry and recognize that it has significant market value.
Secondly, talk to your lawyer or accountant as to whom they would recommend. Also speak with your colleagues about their banking relationships, if they are satisfied and if so, obtain a referral to their banker.
Thirdly, whether seeking financing or daily banking requirements, make sure you are in a position to present a profile of your business, its needs and future plans. During the first few meetings with a banker, use the opportunity to determine if three key facts do or will prevail: 1. Does this banker want my business?
2. Do I really want to do business with this banker and;
3. Will I be able to rely on this banker for help and advice, going forward?
Finally, once you have successfully obtained the necessary financing and/ or established your banking requirements, the relationship should not end there. It is important to maintain ongoing regular contact with your banker so he/she gets to understand your business. Some suggestions in this regards are:
• Give your banker regular updates as to your business plan and financial budgets especially before major events happen such as renovations, acquisition or succession plans.
• Report any bad news before your banker hears from others. The sooner a banker knows about an issue, the better position they will be in to offer assistance.
• Have your banker out to your premises.
• Use your banker as an introduction to other sources of assistance. In all likelihood your banker has many professional contacts that could assist you in developing and growing your business.
• Inevitably your banker will change from time to time. To help ensure consistency in your banking relationship, keeping your banker regularly informed of your business activities helps as their successor will have a complete and ongoing record to refer to when new to their position. Additionally, consider meeting your banker’s manager who may have a longer tenure in their position and hence can assist in times of transition to a new banker.
• Keep your own personal finances in order. You do not have to use the same bank, but it sometimes helps to cement a stronger relationship.
“Most bankers will openly acknowledge that one of the reasons they find their job fulfilling is that they get the opportunity to help business owners succeed.”
• Look to the bank to provide your business with other services that can help you manage your business and personal affairs more effectively, including cash management, investments and estate planning.
Most bankers will openly acknowledge that one of the reasons they find their job fulfilling is that they get the opportunity to help business owners succeed. As a business owner, you have the opportunity to further leverage this resource - the banker that is already committed to your well being - by periodically making them aware of what’s happening within your business. In turn, if your banker responds with ideas, suggestions and/ or service offerings that addresses your business needs (both present and future), that’s when you will know that you have developed a solid banking relationship and you can count on your banker as an integral part of your business operation.
Joseph Pisani is Director of National Franchising Services for BMO Bank of Montreal.
He can be reached at (416) 927-6025 or via e-mail at joseph.pisani@bmo.com.