It’s hard to overstate the importance of
establishing a personal relationship with
your banker. To prosper in an increasingly competitive marketplace, it is crucial to
have a dedicated banking partner who is
intimately familiar with your needs and who
can provide the proper financial resources
to successfully expand and profitably grow
your business.
The best way to establish a strong bond
with your banker is by meeting with him
or her, face to face, on a consistent basis.
“Meeting with your banker every 90 days
is very appropriate,” says Ray Boyadjian,
senior vice president, group manager of
Comerica’s San Fernando Valley Middle
Market Group.
Smart Business spoke with Boyadjian
about establishing a personal relationship
with one’s banker, how to prepare in
advance for meetings and what should be
expected during performance discussions.
Why is it so important for business owners to
establish a relationship with their banker?
One reason it’s important is because the
business owner should want someone who
really cares for his business and has a genuine interest in the progress of the business.
Also, a personal relationship puts everyone
at ease to share information without hesitation. An open relationship helps the banker
to respond more proactively to what may
happen downstream. Let’s say a company is
in a positive cycle and has needs for
increased credit facilities. By freely and
openly sharing information, the entrepreneur will enable the banker to take a proactive approach in meeting the needs of the
business. It is also important to share concerns with the banker if company management anticipates that the business will be
going through some challenging times in
order for the banker to participate in finding
solutions and strategies.
How should business owners prepare in
advance for a meeting with their banker?
The business owner should have in mind
the entire key issues that concern the business. Key issues can be positive; for example, the company may be experiencing an unusual amount of growth and, as a result,
management may need a larger credit facility. On the other hand, key issues can represent challenges; maybe a company may be
expecting a cash flow crunch due to an economic downturn. Business owners should
be aware of all key issues — both positive
and negative — prior to meeting with their
banker so they can have a brainstorming
session and address such challenges. The
essence of the meeting should be the ‘well-being’ of the business.
What type of information should be brought
along?
Most companies are required to do
reporting on either a monthly or quarterly
basis and this information should be provided to the bank in a timely manner. It is
important for business owners to be aware
of their company’s performance. Financial
statements will tell a story about the performance of the business. If the information provided to the bank suggests that
profit margins are shrinking, the business
owner should be well informed of this
development and come equipped with answers and the underlying reasons. This
puts the banker somewhat more at ease
because he or she will perceive the business owner as being on top of things and
addressing issues appropriately. The best
thing business owners can do is analyze
their company’s financial statements and
understand exactly where their strengths
and weaknesses are as well as the underlying reasons.
Who should be present at banker meetings?
If financial matters are comprehensively
addressed in the meeting, it is helpful to
have the business’s owner or CEO of the
company as well as the CFO present. Some
companies, such as those in the manufacturing sector, should also have the COO or
general manager present on an annual basis.
With manufacturers, a lot of things can be
impacted if their processes are not synchronized properly, so the COO or general manager should attend banker meetings at least
once a year, while the owner or CEO and
CFO should attend quarterly, if possible.
What should be expected during performance discussions?
During performance discussions, it is very
important to know where the company is
versus its projections. If it is on target, that
is great. If it is ahead of the target, then management should be able to explain what the
contributing factors are. If it is behind, it is
important to know what the causes are.
It is also important to anticipate what will
happen next year and why. Bankers would
rather not see much deviation from the original forecast. There are two things to which
they always compare the numbers. The first
is past performance: What is happening this
year compared to last year? The second is
projections: What is happening this year versus what the company said would happen?
If a company gives a rosy forecast year after
year but fails to meet its target, then the
credibility of its forecast becomes questionable. You want to make sure there is integrity and reliability behind numbers. <<
RAY BOYADJIAN is senior vice president, group manager of Comerica Bank’s San Fernando Valley Middle Market Group. Reach him
at (818) 379-2926 or [email protected].