When I speak with business owners and senior execs, I am continually surprised by how little time they spend nurturing their companies’ banking and lending relationships. When times are good, it’s easy to ignore – after all, you don’t need much from your banker when the dollars are flying in the door.
When times are not so good, however, most of us wish we had spent more time creating a regular dialogue and trusting relationship with our bankers. Here are a few simple ways to manage your lender relationship during good times that may pay dividends when you need to call in a favor:
- Regular face time at your facility. Schedule an update discussion and tour of your facility on a quarterly or at least semiannual basis. Share recent financial statements, talk about the prospects for the business, new products and the like. Review how the company is performing compared to your current year business plan to give your lender confidence in your ability to plan and forecast.
- Share the news. Make it a point of sharing both good news and bad news on a timely basis. This will give your lender comfort that you will keep them informed as the relationship grows in the future.
- Be proactive and transparent. If you experience a negative event such as loss of a major customer, product recall or some other event, get your lender in the loop early. Explain the situation, the impact on your business and, if applicable, the impact on your ability to meet debt service obligations or financial loan covenants. Present your plan for dealing with the issue, including the time frame and cost.
- Share annual business plans and budget projections. This is a great way to get the leadership of your organization and the bank together in the same room. This is a late 4Q or early 1Q meeting to present your business plan and operating budget to your lender. This helps create buy-in, and it is an ideal time to present business strategies that may require additional financing from your lender. Involve key executives, including the CEO, in the discussion, and request comparable-level executives from the lender to attend. This is a good “best practice” whether you foresee a need for funds or not.
None of this is rocket science, but it’s easy to ignore these important relationship-building activities during good times. It’s probably obvious that the common theme in the above suggestions is “no surprises.” A discipline of regular communication will increase your lender’s trust and comfort level, and it may give you a leg up when you need it.
Question: In addition to to the above, what do you find helpful in developing your business banking relationship?