What Your Banker Needs to Know From You
by Shel Horowitz
When your banker calls, take the call. Kathleen Mullin, from FBC sponsor Sovereign Bank, came to the December meeting to talk about communicating with your bank. "If you're introducing a new product line or building a new building, we don't want to hear that you're on the golf course every time we call. During those critical periods," be accessible.
Succession is another time the bank wants to hear from you. "We want to see the commitment of the new owner to operating the business and to build that succession plan. Read the fine print: a change in management or ownership can trigger a default. It is a material change in the business. We also like to see that the new owners understand the business from the ground up.
"Your banker needs to know where the business came from, what's your business plan, your key goals, how will you stay cutting-edge, key drivers" to achieve those goals: product, distribution, pricing, employees, senior management. The bank "wants to know that you know your company as if it was a Fortune 500 company.".
And, having this information, the banker can go to bat for you! "Banks are highly regulated, accountable to credit committees, auditors, depositors and stockholders. When I can convey to the auditors that I know a company well and I know why the management is doing a good job, those auditors will look at that information - so it's important that you convey that to the bank."
Mullin's colleague Dave Hobert added, "Meet your banker. It sounds real basic, but a lot of times, we only meet the succeeding son or daughter after the fact. Very early in the process, we'll have the new owner come in so they can understand the general relationship that the bank has" with your company.
But, he cautions, "The relationship historically may not be the same relationship that they have going forward. Your ideas of growing the business may be much different. If you change the level of borrowing, that could lead to a change in your banking relationship. Or you may be with a bank that cannot fulfill your growth needs, and you might need to move to a larger bank. "Don't remove yourself to the CEO bubble. Keep in contact with your staff. Bankers love it when the new owner takes you on a plant tour and says, 'this is Mike, this is the piece of equipment he runs.' It shows that you respect the staff and maintain that rapport."
Of course, succession is only one event in the life of a business. Hobert says, "Communicate good and bad news. Avoid surprises, share strategy. It's about planning. If you call the banker the night before you need a half-million dollar loan, it leads to the perception that there's a lack of organization. Share your strategy and you'll have a very comfortable relationship." Hobert says many of the banks strong relationships are with business owners that communicate quarterly with the Bank and as other events occur that require an increase in borrowings or investments.