WHY ENTREPRENEURS AND SMALL BUSINESS OWNERS MUST DEVELOP COMFORTABLE RELATIONSHIP WITH A BANK
Small business is the fastest-growing business of the world economy. As a result, more and more commercial banks are creating special products and programs designed to attract small business customers. It is vitally important for entrepreneurs and small business owners to develop a comfortable, productive relationship with a bank to meet their current and future financing needs. It is advised that a banker be part of a small business owner’s team of outside advisors along with an attorney, an accountant, an insurance agent, and other speciality consultants. The banker’s role on that team is to assist with the business’s overall financial needs, from saving, checking, and retirement accounts to employee benefit plans, loans, and investments.
Before selecting a bank and establishing a relationship, an entrepreneur should take steps to understand his or her current financial needs and plan for future ones. It may be helpful to examine the business’s current position, immediate monetary needs, future cash flow requirements, level of creditworthiness, and ability to repay loans through a detailed review of the company’s financial records and other pertinent documents (i.e., the business plan, balance sheet, income statement, cash flow projection, tax returns, and owner’s personal financial information).
There are many factors a business owner should consider when selecting a bank, including its accessibility, compatibility, lending limit, loan approval process, general services provided, and fees charged. Perhaps the best way to approach banks is to obtain referrals to business representatives or loan officers at three to five banks. This approach aids the business owner by providing a recommendation from a known customer, and also by providing the name of a specific banker to talk to. The company’s accountant, business advisors, and professional contacts will most likely be good sources or referrals.
The next step in forming a positive banking relationship is to arrange for a preliminary interview at each bank to get a feel for its particular personnel and services. It may be helpful to bring a summary of the business and a list of questions. The business owner should also be prepared to answer the bankers’ questions, including general information about the business, its primary goods/services, its financial condition, its banking needs, and the status of the industry in which it operates.
All of these queries are designed to solicit information that will enable the institution to evaluate the business as a potential client. After all these face-to-face meetings have taken place, the business owner should compare each bank to the list of preferred criteria, and consult with his or her business advisors as needed. It is important to notify all the candidates once a decision has been made.
Ideally, a business’s banking relationship should feature open communication. Consultants recommend regular appointments to keep the banker updated on the business’s condition, including potential problems on the horizon, as well as to allow the banker to update the business owner on new services. The banker can be a good source of information about financing, organization, and record keeping. He or she may also be able to provide the business owner with referrals to other business professionals, special seminars or programs, and networking opportunities.