KEEP YOUR ACCOUNTANT & LAWYER CLOSE
KEEP YOUR BANKER CLOSER
My experience of growing a business over the past 14 years has taught me that other than your clients there is no more important business relationship than that with your banker. Growing a business is like most marriages you grow through the rough patches.
Look at the business careers of Donald Trump or Ted Rogers. They both almost went bankrupt but it was their stellar business reputations, problem solving abilities and their close relationships with their financial institutions that pulled them through.
Unfortunately, when companies grow the need for cash grows. Almost every business hits that cash crunch that comes with expansion or too much business. Banks know that too; but, they want to hear it from you first, not when the first bounced or NSF cheque comes to their attention. We all know the horror stories of dealing with the bank. Everyone has a friend of a friend whose business was closed by a bank.
My experience has been this. When you know you have a problem don’t go and hide, don’t be an ostrich because all you do is make the bank wonder if they can trust you with their money and that’s what a loan or line of credit is…the bank’s money.
“Honesty is the best policy” is a good business credo
Whenever I was faced with even a chance of going over our line of credit, I would work out the problem, usually a late client payment or too much business at one time requiring advance supplier payments (some even before the project was invoiced). I would figure out how much additional funding I needed and for what period of time. After coming up with a financial plan I would immediately call the bank, tell them what had happened, how much money I needed over the line and for what period of time. You know I was never refused.
Why? Because when I called them I had a plan and I always followed through, which gave me a good track record with the bank. I’ve learned the bank has rules but they understand growing businesses and will bend a little for those they deem credit worthy or most important trust worthy. “Honesty is the best policy” is a good business credo BUT especially true when dealing with your banker. He or she can be your best business partner or your worst financial nightmare. The choice is yours and it really depends on how transparent you are in all your bank transactions.