Don't Tell Them Everything

The banker can be a friend, ally, and consultant, but not someone in whom you necessarily confide, specifically about things that don't directly affect the banker's interests. If your marriage goes on the rocks, for example, don't rush to tell your banker. If something bad happens in your business, try to determine the cause and develop a plan for remedying the situation before talking to your banker. No business or business owner is perfect, so it's unrealistic for a banker to want to know everything that is happening. "We all have acne in a corporate sense. The banker doesn't need to be our business confessor," Bill Byrne notes.

Pivotal to establishing a good banking relationship is finding the right banker. First, look at a bank's financials. A troubled or insolvent bank isn't going to do you much good, no matter how carefully you nurture a relationship with one of its bankers. Deal with officers as high up in the organization as possible, since upper management tends not to change jobs as frequently as lower-level employees.

Many small and medium-sized banks cater specifically to small businesses, while some larger institutions have small business divisions. These banks tend to have bankers who are tuned into small business issues - exactly the type of banker you want.

Just as you wouldn't hire the first applicant you interview for a secretarial position, why select the first banker you speak to? Interview several. Elizabeth Bradshaw, president of Ginny's Printing and Copying in Austin, Texas, says her favorite banker has "a great bedside manner." The emotional component in a relationship makes it important to find a banker with whom you are comfortable.

When you have established and nurtured a good relationship with a banker, you can count on a brighter future for your business.

What a Banker Wants To Know

To maintain a good relationship with a banker, you must demonstrate professionalism and competence, says Henry W. Gardner, vice president at Bank One in Salt Lake City, Utah. According to Gardner, when a business owner asks for a loan, this is what a banker wants to know:

• How much money do you want to borrow?
• Why do you want the money, and how will it be used?
• What is the primary source that will generate the funds to repay the loan, such as selling a building, selling inventory, or increased business?
• What is the secondary source of repayment, such as liquidation of equipment or injection of additional capital by the firm's principal?
• How will the loan be secured (collateral)?
• Who will guarantee the loan? (The owner should be taking more risk than the banker.)

The 3 Ts of a Good Banking Relationship

Nearly everyone looking for a loan learns the five Cs of credit, which are: character (how trustworthy you are), capacity (your financial strength), capital (the amount of your own money invested in the business), collateral (assets available to back up the loan), and conditions (the state of the economy and your industry).

Mitch Hurley, vice president and manager at First Security Bank of Utah, says that in addition to the five Cs, banking relationships are built on the three Ts:

Talk: For a relationship to thrive, the business owner needs to talk - communicate - regularly with the banker.The talk must be frank and open, even when reporting a negative development.

Time: A relationship takes time to grow. Don't rush it, and don't expect it to bear fruit immediately. Like friendships, a good banker relationship will age well over the course of its duration.

Trust: With honest, frequent communication and time, trust develops, which is "the foundation of the relationship," emphasizes Hurley. When trust exists on both sides, the relationship has the crucial component to make it a lasting one.

Page 2 of 2