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Enhancing Your Relationship With Your Banker - Part 1
BUSINESS TIPS FROM THE EDITOR
January 2024
Richard T. Hendee, Editor
The Silver Fox Advisor
Enhancing Your Relationship with Your Banker - Part 1
As the 2025 Year begins, I thought it would be a good idea if I offer up some tips to our readers about how to enhance their relationship with their banker. Being on the banker side of the desk for more than forty years, I think I have experiences to share that just may be helpful.
This is a two-part series, and I will lead off with Part 1 in the January 2025 edition and Part
ENHANCING YOUR RELATIONSHIP WITH YOUR BANKER– PART 1
- The individual banker(s) make the difference.
- As a business owner you want to make sure you are dealing with an experienced banker who has decision-making power.
- When you are seeking financing for your business, you need to understand the sources of financing.
- Banks, unlike investors or equity partners, are generally averse to taking on high risks (primarily because their rates of return are much lower and to a certain extent, they are loaning you other people’s money).
- Thus, banks seek collateral that can easily be converted to cash to protect their interest in the event of a meltdown.
- Bankers want a business relationship, not a single loan transaction.
- Banks also do not want to be your business partner.
- Nor do banks want to own or operate your business.
- Bank loan rates are typically much less that the return expected by an investor or an equity partner.
- Bankers still use the “Four C’s” of credit when they analyze a loan request.
- Character – Your past credit history (looking for a 650 plus score).
- Capacity - Your ability to repay “ALL” your debt (by at least 1.25 times the total annual principal and interest payments).
- Collateral – If you default, a way to get their money back [some percentage (always less than 100.0%) of the of the value of the collateral].
- Capital – How much of your own money do you have in the deal (typically a 3 to 1 ratio – loan 3 dollars for 1 dollar of total funds needed).
- Any loan request should be presented in the form of a fully developed, well-written business plan with all of the required documents attached.
- NEVER ask a banker “How much can I borrow”. That is a huge red flag that shows you have no idea about your business’ financial condition or position.
- Invite your banker to your place of business for a tour of your operation and answer any questions that he/she may have (one of best invitations that you will ever make).
- Your banker will be your voice at the loan committee so you want him or her armed with all the correct information and details about your business.
In Part 2 of this series I will detail the “Top 10 List” for dealing with your Bank/Banker.
If you need help with dealing with your bank or banker, I would recommend you seek an experienced business advisor, coach, consultant or mentor with a financial or business background for your Company: Contact a Silver Fox Advisor. Remember, having experience on your side always helps.
We encourage you to visit our Website at www.silverfox.org or www.silverfoxadvisors.com to select a Silver Fox Advisor and also to learn more about the Silver Fox Advisors and their businesses, as well as our great programs and community outreach endeavors.
