K.I.T. Maintaining good relations with your bank even when you don't need money from them
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Q: We own an insurance agency, and we find we don't needmuch from our bank now. How do we maintain good relations?
A: The cold reality: The bank doesn't need you at all. Youmust take the initiative to keep in touch. I endorse the followingnine-point program:
1. Keep the lines of communication open with your overworkedaccount officer. Make an appointment to deliver and briefly reviewyour current business and personal financial statements. Give himor her a short history of your company and your current businessplan. Be responsible for educating the officer about your industry.Wait a few months, and invite him or her to lunch. It'sdeductible.
2. Identify shared personal interests or values. Become a goodbusiness acquaintance. In conversation, be candid; never make falseclaims or exaggerate. And don't bad-mouth your competition.
3. Never surprise the banker with bad news. If things are notgoing well and it could negatively impact your accounts or loans,give the banker plenty of warning.
4. Never break a promise to the banker, not even a trivial one.The primary risk factor in small-business banking is thecredibility and character of the customer.
5. Don't be overly aggressive in your accounting choices orin minimizing income taxes. If you follow nonstandard accountingprocedures, the bank can't compare your financials to industryaverages. Banks don't underwrite loans to companies losingmoney, even when there's a deliberate tax strategyinvolved.
6. Network with the bank to meet your account officer's bossand the person who pinch-hits when your officer is on vacation. Goto bank-sponsored seminars and receptions. Learn the names of localbank directors. If you meet them socially, let them know you are asatisfied customer.
7. Only refer quality business owners to the banker. You areknown by the company you keep.
8. Never take the bank for granted by overdrawing accounts ormaking late loan payments. Don't ask for unnecessary policyexceptions.
9. Stay focused on your business, but also seek the benefits ofindustry leadership roles.
George M. Dawson is a business consultant and author ofBorrowing to Build Your Business: Getting Your Banker to Say"Yes" (Upstart Publishing). Send him your financingquestions at bsumag@entrepreneur.com.
