* Has your lender tightened the terms on your existing loans?
* Have you found getting new loans a challenge?
* Has your lender been merged or bought and your relationship lost in the confusion?
* Not sure what is really happening in the banking industry?
Credit is the life blood of our economy and particularly our business-to-business relationships. This flow has been severely disrupted and threatens to take many viable businesses down with it. If you think the impact is just confined to Wall Street or the money center financial institutions, think again! We are now seeing the cascading ripple effects flowing into all corners of our national economy. Cases in point:
* Our client (whose bank recently changed hands) contacted the bank to inquire about their line of credit and was told the bank had no record of any such LOC.
* Another client received a form letter from their bank telling them their line of credit had been frozen. This left the client without their expected operating funds on which to run their business.
Although we are starting to see some freeing up of the credit markets, we still have a long way to go before we get back to “normal.” Many of our clients have had to devote much time and attention to establishing new bank relationships or reestablishing existing ones.
Here are some tips for getting and keeping a solid bank relationship:
1. Have a business plan that provides the company’s background, its history, and most importantly, where it’s going in the future.
2. Provide budget and financial projections. An entrepreneur who’s borrowing money should detail what he or she is planning to do with those funds and how they’re going to help the business grow or thrive.
3. Check your personal credit score regularly. Banks often do. Most lenders are going to look at your credit score because it tells a lot about the individual that you won’t see otherwise in a business set of financials. If an individual has a bad credit score, it doesn’t matter how good the company financials are.
4. Maintain up-to-date financial records prepared by a business accountant even if you use accounting software. A lot of people use canned software systems, but [records] should be prepared by someone who’s financially astute, who can prepare a balance sheet, income statement, tax returns, and updated personal financial statements for the chief executives.
5. Plan for the possibility that you may have to personally guarantee the loan.
6. Be prepared to provide personal collateral for the loan if asked.
7. Seek out information from the Small Business Administration to see if you qualify for a loan guarantee.
8. Start and maintain a relationship with the bank. If a bank is going to make a loan, they want you to bring your entire banking relationship to them—deposits, business accounts, even your personal account.
9. Refer other businesses. Banks are always interested in receiving referrals. It’s not a bad thing to refer other businesses to your bank.
10. Don’t surprise your banker. Banks don’t like surprises. If there are things happening at the company—good or bad—be sure to communicate with the bank. Let them know how you’re doing—the things that are positive and negative. Make a concerted effort to meet with the bank regularly.
