A growing business has growing needs for credit. That means having a good relationship with your bank in order to maximize your ability to obtain required credit.
“It is extremely important to begin your relationship with your business banker as early in the lifespan of your business as possible,” says Donna Neal, chief lending officer for ViewPoint Bank in Dallas. “Ideally, you want to do that as you develop your business plan, even before the business is up and running.”
Smart Business asked Neal for additional insight on creating and maintaining a relationship with a business banker.
How thoroughly and how often should you discuss your business situation with your banker?
It depends somewhat on the type of business, how fast it is growing and your anticipated needs. At a minimum, you need to meet with your business banker once a year. Provide your year-end report, detail how you see the current year progressing, and detail any potential challenges to your plan. If you are contemplating a change in your business plan, you need to discuss that with your banker as soon as possible. If you are not meeting projections, you should discuss that with your banker. Provide your analysis of why projections are not being met along with an action plan to rectify the situation.
Your banker needs to hear about your successes and your challenges. Consider potential needs long before you have credit needs. The business banker can help you develop the required file as the need for credit approaches.
How much should be said about key employees and their contributions to the business?
This is additional information that can help your banker get to know you. It is equally important to have a succession plan and to advise your banker of that plan. If you are counting on certain individuals to help you move the business forward, you need a plan to continue business progress if something should happen to any of those individuals.
Your banker likes to know that you are thinking ahead. It is also important to involve key employees in your plans. Get their input before meeting with your banker. The more you utilize the talents of your key people, the more valuable those talents are to you.
If the business is seasonal or there are other areas that differ from more standard business situations, is the banker going to understand?
That is another reason to develop your relationship early on. The more your banker understands how seasons, weather, holidays or other variables affect your business, the more he or she can be prepared for those occurrences.
When loan officers see inventory is high and receivables low at a specific time they won’t be concerned if they recognize that as a part of your regular business cycle. If there is a good reason for certain ratios to be other than the generally accepted norm, those figures can be a positive — or at least neutral rather than a negative. If your trade group or association provides average income and expense data that support your business plan or mirror the cyclical aspects of your business, that information should also be shared with your banker.
The banker who understands that there will be peak times and slow times, when they are expected, and how they affect the overall business plan will have more confidence in your projections and your business.
Does a business owner’s personal credit have any bearing on the company’s credit?
It definitely has an impact. You need to be open about your personal credit situation along with that of any other owners.
If you are considering taking on partners or additional investors, you need to be aware of their credit situation, and they need to recognize that it will have a bearing on the availability of credit to the company. It is very important to know who you are going into business with before their signature is on the line.
Before the bank lends money or issues a line of credit, it is going to look at every possible aspect of the company and the owner or owners. The company’s credit is going to be based on the overall credit of each owner. It is important that all parties understand their shared and individual responsibilities.
In summary, the more your banker knows about your business and the earlier he learn its, the easier he can meet your credit needs as they arise.
DONNA NEAL is chief lending officer at ViewPoint Bank. Reach her at (972) 509-2020 ext. 7355 or [email protected].