Building a positive relationship with your bank is essential for any independent business owner. However, if you find interactions frustrating, it might be time to learn your banker’s language.
Timing is Key
Ask for financial support before you actually need it. Most banks conduct an annual review, updating your financial information and renewing agreements. Requesting a loan unexpectedly forces them to redo this process outside their usual schedule, which can disrupt their efficiency.
Strategic Requests
Pre-approved Capital Spending:
Get pre-approval for a set amount of capital spending annually. This way, if an opportunity arises, like purchasing a necessary truck, you can act quickly with pre-approved funds.
Increase Your Line of Credit:
During your annual review, request an increase in your line of credit. This flexibility gives you the confidence to manage cash flow and make growth-driven decisions without stress.
Growing businesses often need more cash upfront. Being proactive about these requests shows your banker your plans for growth, making them more likely to support your ventures.
Provide Essential Information
Think of the bank’s approval process as a meat grinder: you must provide the correct information for a favourable outcome. Historical loyalty or missed payments don’t factor into this mechanical process.
Key Ingredients
Cashflow Surplus:
Ensure your financials show you make enough cash flow profit to cover payments, plus a margin. Work with your accountant to adjust for any one-time expenses from previous years that may not reoccur to present a clear picture of your future finances.
Solid Assets
Banks remain conservative; they prefer loans backed by solid assets. Show your commitment by retaining profits within the business, bolstering financial strength and demonstrating shared risk.
Understand the Process
Your loans officer is your ally, helping to convince the bank’s credit system—a “good cop, bad cop” dynamic—to approve your requests. Presenting your case effectively can make all the difference.
Helping business owners and bankers find win-win solutions is rewarding. If you need assistance in improving your banking relationship, feel free to reach out.
