NFIB

Tips for Working With Your Bank
03/ 05/ 2002


For many growing businesses, it's essential to culture and maintain a good working relationship with a bank. This is especially true if a business' cash flow varies markedly from season to season, or if new inventory frequently must be replenished before existing inventory is sold. In today's Workshop, Jeff Moses highlights seven key factors that can help a growing business establish a satisfactory banking relationship.

1) Always prepare carefully before approaching your bank with a loan application. Make sure that your business plan is current, and supply the bank with complete and accurate income statements and balance sheets. Be ready to give specific information about why you need the money, how it will be spent, and how it will be paid back. These are probably the most important factors a bank looks for in any loan application.

2) You should never be hesitant about asking your bank for a loan. Don't approach a loan meeting with the attitude that the bank is doing you a big favor just meeting with you. After all, it's how they make their money. Processing loan applications is an everyday business for a bank, and they will consider it unprofessional if you're overly obeisant.

3) Banks make decisions based primarily on numbers: your company's past cash flow, your accounts receivable, how much you have on account, etc. But bankers also place importance on a borrower's overall personal reliability. If you've met all payment schedules for previous loans, a banker will be more likely to give you preferential treatment when working with you on future loans. For this reason, do your absolute best to avoid late payments, even if you have to cut back on something else.

4) If you ever do have to make late payments, let the bank know as far in advance as possible, and tell them exactly why your payments will be late. They'll want to know when you can pay, so work out a schedule with them, and stick to it if at all possible.

5) Never go into a meeting with your banker dressed casually. Wear appropriate business attire, as you would when attending any highly important business meeting.

6) Always err on the conservative side when making financial projections about your company. Overblown estimates of revenue and earnings are like red flags to banks and are an immediate turn off. Of course you don't want to downplay your past results or upcoming potential, but a sober, serious estimate of future sales and growth will help solidify your relationship with your bank.

7) Make your bank aware that you're not the type of person who shops around merely for the lowest interest rate on a loan. They should know that you are seeking to establish and maintain a mutual ongoing relationship. Most banks have rates that are comparable, anyway, so you won't be sacrificing much by setting up a long-term, solid relationship that will make immediate funding available in a wide variety of circumstances.

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