By Bill English, Partner
I’ve met my fair share of business owners who are skeptical of lawyers, bankers, accountants and/or financial planners. I’ve known some who give some information to one advisor and other information to another advisor but never give the full story to any single advisor. Others view advisors as necessary evils – skills that one might need once in a while but on a regular basis, they are never to be trusted.
And now the Coronavirus is here. The government is giving out money with very thin underwriting standards. And these skeptical owners are becoming increasingly frustrated trying to find a banker with whom they can file a loan application. What they are finding is that most bankers are way too busy right now to take on new customers, so they are saying “No” to anyone who isn’t already one of their customers.
These owners’ distrust of anyone but themselves is coming back to haunt them. At the time of this writing, I’ve had five different bankers tell me that they are not servicing new customers. Period. They don’t have the human bandwidth to service the loan requests from their existing customers, let alone from new customers.
When I have the chance, I tell business owners to develop their banking relationships during the good times – when they don’t need a line of credit or don’t need a better cash management system. Bankers are not your enemy: they are your friend. They can only make money when your business is healthy, so they will work with you to design the right debt in the right amounts that will give you the best opportunity to pay it back. It’s a win-win collaboration. This collaboration happens best when your business is doing well.
The common complaint about banks is that they’re “never there when you need them.” When the chips are down, that’s when they turn their backs on you. “Just try to get a loan when you really need one” is another way this complaint is voiced. But the complaint misses the foundation of a banking relationship in which you, the business owner, collaborate with your banker during the good times so that they can be with you during the bad times. If you try to establish a relationship with a banker when your cash flows are bad or you have a downturn in sales, the regulations under which they work, coupled with good banking practices, will make it difficult for them to work with you.
So, after this storm passes, make the effort to establish a good relationship with a reputable bank. Get to know the commercial bankers there. Go out to lunch with them. Set aside your misgivings and learn to trust them. Have them over to see your business. Have them meet your Controller. Let them see your financials and make sure to voluntarily send them your financials on an annual basis. Consolidate your depository accounts with them. Be fully honest and transparent with them. Take advantage of their cash management programs. If you do these things when the times are good, your banker will be able to stand with you when times are bad. But if you shun your banker during the good times, don’t expect them to suddenly “be there” for you during the bad times.