It pays to have a strong relationship with your small business bank
Developing a strong relationship with your bank can be critical to your small business as you grow. While some small business owners have a skeptical view of bankers, fortunately most are not Mr. Potter, the compassionate-less banker in the movie “It’s a Wonderful Life.” Not only can banks provide a loan or line of credit when you need one to help you expand your product or service offering; add to your workforce, on site or remote; or build out your IT infrastructure, they also can provide financial advice and even help you network and refer business. Your bank also may be able to provide information about your marketplace that can help your decision making.
Whether you are just now looking for a bank for your small business or are not satisfied with your current one and want to make a switch, start your search by thinking long term. You may only need a business checking account today, but you’ll undoubtedly need more services as your business grows. If you aren’t sure about what financial institutions to consider, ask other small business owners for recommendations. You’ll want a bank that has a commercial banking department. Don’t rely on a bank’s prepared materials or information online to make your decision, however. Schedule a meeting with banks you are considering – ideally two or three – and prepare a list of questions in advance.
During your meeting, find out how much of the bank’s business is focused on lending to small businesses and if the bank lends to types of businesses in your market or industry. Ask about the bank’s other mix of services and products you need now or will down the road, including traditional loans or lines credit, auto/equipment leasing, 401K services and credit cards. You’ll also want to know about fees for checking accounts, ATMs or other services.
It also helps if your bank is involved in the community. If it is, your banker may be able to introduce you to local business groups or other organizations that might be useful to your small business.
Manage the relationship
Once you choose your banking partner, the work doesn’t end. You’ll need to continue to manage the relationship. Get to know the people at your bank. If there are a number of branches, try to use the same branch regularly so the staff gets to know you.
If you secure a loan, it’s important to keep the communication open and ongoing. The Small Business Administration writes in “The Benefits of Making Your Banker Your Friend,” that “Communication – or lack thereof – is probably the greatest weakness between entrepreneurs and bankers.” Don’t avoid telling your banker if there’s bad news. No one likes surprises, much less the financial institution where you owe money.
SBA advises that small business owners and bankers should communicate at least quarterly. Banks usually require quarterly financials and an annual major review if you have a loan. Monthly financials also may be necessary if a loan is based on inventory or accounts receivable. Consider inviting your banker to view your facilities.
Even when it comes to overdraft, be proactive. Contact your bank and explain you’ve made an error and may be overdrawn. See if you can have the overdraft covered until you make a deposit later that day or the following. Or you may be able to get overdraft charges reversed.
Above all, meet whatever commitments you make to the bank. Failure to meet a loan payment or provide timely financial information will become part of your business record. If for some reason, you can’t meet a commitment, advise your bank well in advance and see what it can do.
Your bank is a key business partner. Choose one that understands and meets your current business needs and can continue to support you as you grow.