By Tyler Smith, Southwest Missouri Bank & Andrew Jordan, Jordan CPA Services
If you are only talking with your banker when you need a loan, you are missing out. The old saying is that every business needs a good Banker, Accountant, and Lawyer. What a lot of small businesses don’t realize is that they don’t just need a banker to help finance the start of their business.
A good banker should be part of your team that you regularly meet with and get their professional opinion on how things are going. Having a good banker on your team means having someone who will help you get the cash to grow your business when an opportunity comes along. They could also help you weather a downturn in your business.
The most important part of a business owner and banker relationship is communication. It can build credibility and mutual trust. One of the best ways to build trust is simply saying you will do something, and then doing it. If you tell your banker you expect sales to increase by 15% this year, and they do increase, you just earned credibility. At the same time, if you are sure your sales will be down 10% this year, don’t delay the conversation with your banker. If you tell them in advance, you will still gain credibility, and they will not be blindsided if you need some funds to make it through the downturn. Talking proactively with your banker gives you a chance to work with your banker as a partner instead of treating them like an outsider. An unpleasant surprise when they see your lower numbers without any warning damages trust.
Do you know your business? Do you know what makes you profitable or what leaves you vulnerable? Being able to explain why your business is experiencing a downturn and backing up your assertions with facts is important. For example, if you lost a large customer, explain why you lost that customer and why you don’t think others are going to leave for the same reason. By telling your banker the exact impact of that loss—like last year we did $125,000 in business with this customer, and this year we only did $10,000—allows your banker to quantify this impact. Showing that you really understand your business helps establish credibility with your banker, setting you up for more productive conversations in the future. Of course, if you don’t understand what is going on with your business, you need to get that figured out first.
Are they consistent? Do you provide updated tax returns and statements yearly? Is what they see all year long on your monthly financials the same as what they see on your tax return? Are there any big surprises? Understand what story your financial statements tell. You may think that as long as you are making money, all is well, but if you don’t know why you are making a profit, that can be just as concerning because you might not really be able to continue making money.
Your business should have a strategy behind what it does, and your banker is generally interested in hearing your plans. If you have a great new idea to bring in new clients, tell your banker about it the next time you talk with them. They may not loan you money just based on unproven ideas of how you will grow or improve your business, but they will likely give you some good feedback. Plus, including them in your plans for your business will give them context for when you come back to them at a later date and say you need more capital to fund the growth you told them about six months ago.
So schedule a meeting, bring in your most recent financials, and just talk with your banker about your business for an hour. They talk with businesses like yours all day every day, and you might be surprised by some of the insights and encouragement they offer.
Tyler Smith is a lender at Southwest Missouri Bank.
He can be reached at 417-358-1770.