Partner Article

Managing your bank manager - a useful guide for small business

The banking sector has taken quite the beating over the last few years and there aren’t many out there who are quick to defend the role of the banks. That said, as the recovery starts to kick in, the local Bank Manager will once again play a significant role in the future of British and global business.

Whether you are growing or established, it’s important to understand that the relationship you have with your bank is one of the most important for your business’ success. Here is a brief guide to managing that relationship.

Understand the Bank Manager’s point of view

Bank managers want nothing more than a portfolio of commercial clients that are all performing well and able to repay any debts. If you make money the bank makes money. Don’t assign yourself to misconceptions that the bank manager will be happy to see your business fail or that he/she is not a friend of small business (as politicians may have you believe), this will only make relationships more difficult. The bank wants you to succeed.

Think backwards as well as forwards

Often new and young businesses think that banks are more likely to lend money when they see robust business plans forecasting future growth and profits. The bank is just as likely to be interested in seeing a good track record and adequate security position as well as prudent planning.

Use the bank manager’s knowledge and experience

There are frontline bankers who have significant experience of working through a wide variety of commercial problems. If you are having a problem in your business your bank manager is likely to have seen it before. Leverage off this knowledge and experience.

Manage your covenants

When provided with debt facilities you should have a suite of covenants and conditions to be monitored regularly which can, if triggered, highlight any stress on the business. Keep up to date with these. Triggering a covenant breach can prove vital in the long term success of the business, allowing you and the bank to take action. Ignoring it, and even worse, trying to hide it will only put strain on the relationship and business.

Be honest about payment issues

If you are having problems receiving payment from a customer speak to the bank, they can often make allowances. If you are regularly having problems with late payments then it’s not just a bank issue but it’s an issue for the business and something needs to be done.

Price is only one factor

Do your homework locally, find out about the bank and the local office reputation. Who makes time & who never has any time for customers? Quality of service and commercial knowledge should be significant factors in your decisions, in particular look for the bank that understands your business. Also consider what the press saying about the bank.

Remember it’s up to you to do the running

It’s not the bank’s business, it’s your business and that’s how the bank will see it. In order to keep them at bay, and give them the confidence that you are the best man to run your business, make their job easier.

There’s no excuse really for bad bankers anymore, the recession should have eradicated them, and in fact the whole industry should be better now. For your business to prosper though it’s important that you and the bank work together.

This was posted in Bdaily's Members' News section by Daniel Knowles .