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Jul 26, 201208:22 AMThe Bottom Line

with contributors from Associated Bank

Seven ways to maximize your relationship with your banker

Seven ways to maximize your relationship with your banker

Any good relationship starts with finding the right partner. This is especially true when business executives seek a beneficial relationship with a bank. Banking relationships are unique in that bankers have a role to represent the bank as well as be an advocate for the client.

You will want to select a banker who can successfully execute in both of these roles. Your banker should ask questions to adequately understand your business objectives and to offer a customized suite of products and services to meet your business goals and objectives. Business executives want someone who is not only experienced and knowledgeable about their business and industry but also has the analytical expertise to understand financials and knows how best to structure loan terms.

To help establish and grow that relationship, executives need to know what and what not to ask financial advisors in order to maximize the business relationship. The following key steps will help guide that process:

1. Communication
Set up a regular meeting plan with your banker, one that meets the objectives of both your banker and your company. Be clear on the objectives of these meetings and what information should be shared at the meetings as well as between meetings. Be open in these communication opportunities to share concerns and expectations. This is also a platform to disclose all financial information, both good and bad, in a timely and consistent manner. Additionally, ask for your banker’s assessment of your borrowing capacity. Be sure you understand why the limit has been set where it is and what steps you should put in place to increase your borrowing capacity. Ask for industry comparisons from your banker, allowing you to better understand how your company stacks up with others in the industry when comparing financial ratios.

2. Building Trust
Focus on building your banker into one of your strongest advocates. This will prove beneficial to you in that they will need to sell your business to their internal credit team, and you will want them to be confident in you and your team. Building trust happens as a result of effective communication. Be as open as possible with your banker and be sure your banker knows the key colleagues on your team and how they bring value to what your company is achieving. Building trust and integrity can also mean sharing bad news when it happens. Being transparent about all news, both good and bad, in a timely manner allows for open and candid discussions that will inevitably help build trust in the long term.

3. Financial Preparation
Know your numbers and be prepared to support your sales forecast based on tangible information. Work closely with your financial advisors to sketch out likely scenarios as well as a forecast with a declining scenario. Perform detailed six-, 12-, and 24-month forecasts with an emphasis on cash flow. It’s this cash flow that is used to repay debt. Educate your bankers on the industry and how your company is expected to perform within the marketplace and against its competitors. Know your market share and explore ways that, with the bankers’ input, you can expand your reach. Ask for and expect to receive ideas, concepts, and strategies from your banker on how to improve on financial results. Remember, your banker is your financial partner and should be available to provide advice, counsel, and solutions.

4. Strategic Initiatives
Reserve time at least once a year to have your banker join your company’s leadership team to brainstorm ways in which the company can grow. An idea-generation session will help build trust with your banker and showcase the depth of your leadership. There is the potential risk of exposing gaps or weaknesses in your team, but, if done correctly, this process can go far to build trust and improve communication.

5. Downside Contingency Planning
Be prepared to show your banker the downside risk in your business, such as the loss of any key customers or a shift in product/service demand. Have a plan or course of action that you might likely take in order to survive that crisis. Be honest and up front with your thinking and planning and use this discussion to once again ask for input from your banker on any other ideas. This type of discussion demonstrates your forward thinking and, once again, helps to build trust. It will also allow you to assess the experience and capability of your banker.

6. Succession Plan
Build a succession plan that can be shared with your banker. Be sure your banker has had an opportunity to meet the team and to get to know your colleagues. If you have current gaps on your team, you will need to recruit and/or develop talent and establish timelines for that development. Also include any financial impact on your company that will come from the building of this succession plan. The last thing your banker wants is a company solely dependent on one person running it. Depth and diversity of responsibility on the leadership team are just as important as the depth of capital on your balance sheet.

7. Banking Services
Not all banks are the same. Do your homework and check references. Ask for clients who can validate prospective bankers’ claims that they are competitive, experienced, and relationship driven. Allow your bank to have a profitable relationship with your company. A win-win situation occurs when the bank is allowed to make money on your relationship and you feel that you are being treated fairly. Expect and insist that your banker regularly provides and suggests new ideas, concepts, and banking products that will allow your company to save money, make money, or compete more efficiently in the market. Be ready to negotiate on bank services, as they are not free and you can drive a better deal with your banker by consolidating banking services into one bank.

Building a solid banking relationship takes time and hard work on the part of the banker and client. However, maximizing that relationship is mutually beneficial. Demonstrate to your banker that you support the bank and expect to receive the same support in return. Remember: a mutually beneficial banking relationship hinges on honesty, integrity, and open, candid discussions.

Gary Schaefer is the executive vice president, Commercial Banking Group leader for Associated Bank in Wisconsin and has more than 38 years of industry experience in the local business banking community.

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