It’s critical for business owners to have good relationships with their bankers, but it can be equally important to get to know the bank itself.
What’s the distinction? A close relationship with a banker likely entails some degree of a personal connection. You know each other and trust each other. It’s a strong bond that makes working together a breeze.
It’s a different relationship than the one you have with the bank as an organization. This relationship is more about being familiar with the bank’s overall philosophy, structure and capabilities. Do you know what the bank stands for as an institution? Do you know who else might work with your banker and what their roles are within the organization? Does the bank offer non-traditional products that you may need or that may improve your efficiency and profitability, such as treasury management, international services, interest rate hedging products or investment solutions?
Here’s why this relationship with your bank — and not just your banker — is so important.
Partnerships for more expertise
Bankers are part of a team of people with an exceptional amount of specialized expertise, many of whom can be pulled in to solve particular pain points, offer solutions above and beyond, and even be leaned on to help your business grow.
Your bank should make it known from the beginning of your working relationship that you are supported by a team, not just a single banker. This should be clearly communicated, and you should feel comfortable connecting with other team members, even if you don’t know them on the same personal level as your primary banker. A team approach is also useful if you’re looking for non-traditional services or products, as your banker can more seamlessly pull in colleagues to provide the right support.
Knowing your bank can help you navigate the credit process
Even if you are comfortable working with your regular banker on financing, it’s important to understand how the bank as an organization approaches the credit process. That’s where being knowledgeable of the “five Cs” of lending — and taking proactive steps to be able to positively address all of the areas — can be helpful. These five Cs are:
Capacity: What’s your debt-to-income (DTI) ratio and how might that affect your ability to repay a loan?
Capital: What type of savings, investments and other assets might you have available to put toward a loan?
Credit history: What’s your credit history and how have you managed debt in the past, both on a business and personal basis?
Collateral: What asset can work as security for the loan?
Conditions: How might you use the funding and what’s the amount needed?
“Cash flow” could also make this list as the sixth “C,” but what this all boils down to is the fact that banks look at a number of different factors when considering credit. Different banks also give different weights to these items depending on their approach to lending.
Understanding the Cs is critical, as is understanding which of these your bank might prioritize. That’s part of being familiar with your bank’s philosophy. Working with your banker on a loan might be so second nature that you don’t even think about these factors, but they’re good to keep in mind when engaging with other bank employees who might not know you as well.
In an ideal world, your business could work with just one banker all the way until you retire and enjoy your hard-earned success. But your best bet is to develop a close relationship with your bank, too, to ensure you always have the financial support you need.