Banks are always a hot topic, do they help business owners or hinder them? Do they offer good service levels? Do they care?
It’s tough to answer the above because there are good and bad people within each of the banks and they are all working to different agendas as individuals and as corporate entities which make it hard to compare apples with apples. However, there are some general observations that I have made that may help you to gain what you want and need from your bank relationship – certainty.
First, banks are always finding themselves under scrutiny with it being a rare day when there isn’t a news headline relating in some way to the banking sector. New customer service information has recently been published in the Telegraph and makes interesting reading. This data is focused on personal accounts, but the bigger the bank, the worst they seem to do and I suspect this will follow for business customers.
Some of the issues are now impossible to resolve for the bigger banks. With so many senior management changes leading to one review or restructure after another, they can no longer reverse back to a point where everything worked – or appeared to. Apart from the loss of so many experienced staff from many banks, the world is a different place with much greater compliance rules to be followed. This means that the staff that left behind are horrendously busy and often the best people are the ones who end up with the least amount of time to help you as a customer because they take ownership and end up swamped.
Therefore, I think you need to find ways to help yourself to help them (the managers and the banks) in order to gain the service and products that you need for your business.
I’ve laid out a few tips to remember when dealing with your bank or a new bank which may prove useful:
A bank is a secured lender of money, not an investor. Do not approach a bank with the view that they should ‘invest’ in your business. Investing involves a great deal more risk and would normally offer far greater returns and some element of ownership for the investor.
Find a manager who you like and get on with and who demonstrates they do understand and value your business. Go with the right person, not the institution
Be blunt, ask them what their credit function think of your sector and type of business and what problems they feel they may encounter with a credit proposal submitted on your behalf.
Give them all the information possible, management accounts, budgets/forecasts, simple business plans (that you actually use), key performance indicators with the frequency of how you track them – basically help them make a decision to support your business by showing them how good the management are and how easily you can react to a problem to resolve it.
Highlight every issue or negative and provide them with the solutions or mitigating factors that mean they can still feel confident about lending your business money.
Remember that a lot of the bank sector problems were down to lenders giving money against security alone, that no longer works nor should it have ever been the case. The security you give is a last resort so you should always think how you will be able repay the lending in every situation
Involve a good firm of accountants to help you produce the financials if you haven’t got quality resource within the business. The quality and reputation of your professional advisers is more important than ever with the banks.
In addition, in my business, we have found we increasingly need to look at covenants, other conditions, security and pricing in our work with clients on banking matters. It doesn’t help that pretty much every bank has different policies for its lending to different sectors. However, they typically want to find a way to lend the money and if you’ve found the right manager, it’s worth your time and money to help them to get your requested facilities through their credit function.
Ultimately, don’t be left thinking you have no option but to stay with the bank you’re with, that is rarely the case and always remember that your bank is just another supplier of goods and services for your business. Equally, so often I find that banking problems being encountered by a business are simply down to poor communication on both sides. So do work hard to engage with your bank and understand their needs and requirements.
Finally, bearing in mind this is a massive subject that could go on forever, one last tip, possibly the most important one. Bankers do NOT like surprises. Share information and plans at the earliest opportunity and share the pressure of finding solutions with the bank. They will be far more likely to help and work with you or if they won’t, you still have time to seek alternative solutions. Last minute requests will not go down well, people are left under pressure to make a decision, may feel backed in a corner and left with a view you don’t really know what you’re doing in your own business.
So work with the right bank manager and be as open as possible and share all the information you can. Help them to help you.