Don’t wait until the last minute to clue
in your banker on bad news. Maybe
you lost a key client, or perhaps last quarter’s financials substantiated what
you predicted — a weak year. During
challenging economic times, certainly
your business isn’t the only one struggling
with customers, vendors and market
trends in general. Include your banker in
these conversations early, and he or she
will be more likely to work out solutions
for your business.
“You know when business is going south
before we do; don’t wait to tell us,” says
Craig Johnson, president and CEO of
Franklin Bank in Southfield. “The key is
communication, and this means consulting
with your banker during good times as well
as bad. Your opportunity to work through
an issue, or a bad year, will be more successful if you have consistent, strong twoway communication year-round.”
Smart Business spoke with Johnson
about what information readers should
bring to a banker meeting and what to
expect during regular performance discussions.
How should you prepare for a meeting with
your banker?
Before the meeting, call your banker
and let him or her know why you are
coming. Don’t show up and say, ‘Well, we
had a terrible year.’ Your banker will
want information, such as financial
statements, so he or she can conduct an
analysis before you arrive. This way, the
meeting will be more productive, and
the banker will be prepared to present
viable options to help your business
move forward.
So the first rule is to preface any bad
news. Say, ‘I want to meet with you next
week. We had a tough year. I’ll get you the
information ahead of time so you can take
a look at it. I want to see where we stand
and get some guidance from you.’
What documents should you bring to a bank
meeting to help communicate your company’s performance?
Certainly bring your financial statements
and reports from the last quarter. It’s
always a good idea to update a business
plan regularly based on those quarterly
results. You’ll want to show your banker
this document, as well.
Also, be prepared to discuss market
trends. What is going on with your competitors, good and bad? What patterns do
you notice in customers and vendors? Are
you seeing an expansion of pay times from
your customer base? Are vendors having
difficulties meeting delivery dates?
In turn, your banker should counsel you
and provide insight on what he or she is seeing across industries. Bankers meet with various types of businesses, and they can lend
perspective on whether the customer/vendor
trends you notice are across the board.
What questions should business owners be
prepared to answer?
First, you should approach the meeting with an open mind. Come in with a plan, but
also be prepared to listen to the banker’s
proposals. Depending on the circumstances, the bank may want you to consult
with a third-party specialist who can take a
look at the business and provide an unbiased opinion. These specialists are looking
to protect the bank, but they also want to
see you, as a client, succeed. Because they
don’t have direct relationships with your
employees or vendors, they can assist you
with tough decisions, which may ultimately
improve your financial performance.
What other conditions should a business
expect in a bad-news situation?
Generally speaking, and depending on
the loan amount and circumstances, a
bank will put you on a dominion of funds.
You will be asked to put monies into an
account that is controlled by the bank.
Or a bank may also do an analysis and
request additional collateral. If you expect
your financial institution to stand behind
you when you are having difficult times,
you should expect the bank to also ask you
to step up and provide collateral support.
That may include an additional pledge of
assets of the company or personal asset
pledges. Be prepared to address that.
What about good times? Are meetings just as
important then?
Absolutely. When business is great, many
owners don’t think they need to talk to
their bankers. But those are times when
you should keep your banker informed.
That will make him or her feel a part of
your team. Then, should something go
wrong, the banker is in a better position to
work with you, understanding your business history and success in the past.
CRAIG JOHNSON is president and CEO of Franklin Bank in
Southfield. Reach him at [email protected] or (248) 386-9860.