5 Key Steps to Build a Valuable Relationship With Your Bank
A good banking relationship is critical for any business; that relationship should grow as your business grows and can develop into a very strong bond as long as you manage it properly. A good connection with your bank will provide ongoing information with often, free consultation regarding the growth of your business. As a small business owner, free expert advice on your financial matters from someone that really wants you to succeed is invaluable. The bank wants you to flourish since your growth and success will directly influence their overall financial strength.
Establishing a strong and positive relationship with your bank starts with the following 5 key steps:
1) Set up your business bank account with an institution which deals specifically with your size of business and type of product line. You don’t want to be the only food distributor the bank works with; you want the benefit of the bank’s experience based on other businesses in your category. It will be easier to build your relationship if they are familiar with your particular industry.
2) Manage your business account carefully and avoid keeping your balances too low; over-draws and bounced checks are counted against you. This will raise a red flag internally and you will not be eligible for the best programs the bank has to offer. Bankers are very much aware of whom their stronger clients are; you want to be in that category.
3) Borrow several small short-term loans and pay them back quickly to establish positive business credit. Even if you don’t need the loan and you can pay cash, go ahead and take it out anyways. It will do 2 things for you; help you learn the process and paperwork shuffle required to get financing and second, it will establish good pay-back history which will be important as your business grows.
4) Inevitably, in the young life of a new business, payments will be missed and forecasts will be off target. When these issues arise, make that first phone call to your bank to discuss what is happening with your business flow. Keep them informed so that the bank knows you consider the relationship important and to get valued feedback. Even if you can deal with the matter yourself, sharing your challenges will strengthen that partner relationship.
5) Develop a personal relationship with your banker, that’s why their business card states, “Relationship Banker.” Take them out to lunch, they will never say no because they understand the value of networking and building trust in the community which is vital to their success. Tell them your story, summarize your plan and let them in on your dreams; where you want your business to go and what you envision for the future. Make your personal banker a cheerleader for your cause and you will have someone on the inside always voting in your favor.
Relationships are important for all parts of your business; the relationships with your vendors, suppliers, partners, employees and customers are all vital. But one of the first relationships you need to solidify is the one with your bank. Since lack of capital is one of the top 3 reasons businesses fail, you want to build a strong alliance with your source of capital. They may not be able to supply all the funding you need for every situation but they will always be a cornerstone for your daily operations and financial stability. Build your relationship early on and enjoy the benefits throughout the life of your business.