How To Evaluate Your Banker

Strategies for Evaluating and Building a Solid Banking Relationship

One of the most important strategic relationships a business owner has is with his/her banker. Yet so often, we treat this relationship as a commodity.

Switching banks is not something that I would recommend lightly. As veteran business owners know, the process is cumbersome, stressful, and time-consuming even under the best circumstances. However, sometimes you have to know when it’s time to make a change.

Why Change?

Once you settle into a bank, what would bring about a change? There are a few reasons why a business owner would willingly go on the hunt for a new financial partner:

1:Instability/volatility of current bank. The banking industry has exprienced tremendous volatility over the last several years. There have been an unprecedented number of acquisitions, which means that you may be in the position of banking with an organization that you didn’t originally join. Further, many banks are financially unstable. One of the worst things that can happen to a business owner is to bank with an institution that fails.

2: Personnel turnover. The relationship with your banker is paramount. Its importance in relation to your business is equal to the relationship you have with your lawyer or accountant. Industry instability brings about a lot of attrition. Bankers frequently jump from one bank to the next. It’s common for customers to follow their bankers as they make career moves.

3: Strategic banking. As a business grows, the need for strategic banking grows. A top-tier bank is full of potential strategic partners and customers. Bank executives know that this is a competitive differentiator.

4: Terms of the loan. As your business grows, so will your need for additional capital. Excess loan fees can quickly accumulate on loans that are $1 million, $3 million, $5 million, or more. What seemed to be a small amount on a $200,000 loan looks a little different as your needs grow. Financially strong companies are attractive bank customers, and they have negotiating power.

Whether you decide to stay with your current bank, or evaluate alternatives, there are four strategies you can use to strengthen your relationship.

1: Proactive, transparent communication. Keep your banker in the loop about your financial situation. If there will be cash flow issues  (which are especially common with government contractors), let them know early.

2: Keep them in the loop about your pipeline and your wins. Let your banker know what’s coming down the business development pike. They’ll understand cash-flow peaks and valleys a lot better if they have a clear view of the horizon.

3: Share good news, press, etc. with them. Have you received any press lately? Let them know. Up for an award? Share the news. Banking is a relationship, not a transaction. Don’t just call them when you need something.

4: Maintain a non-banking centric connection, as deemed appropriate. In other words, humanize your connection with your banker. Connect on the various social media outlets, invite your banker to networking events or company outings. Truly “connect” with them.

Like any relationship, you will get out of it what you put into it. Nurture your relationship with your banker, and it will surely yield strong dividends for years to come as you build your business.

Posted by Marissa Levin