Be honest. We all kind of complain about each other. It’s a normal part of being a human being. As agreeable as most people are, when it comes to dealing with others, there are still ways to improve our relationship. Even when our motto is “the customer is always right,” with a little nudge they could be perfect!
During the last few years I have spent a lot of time with small business bankers. The conversation generally turns to examples from our past experiences, both wonderful and horrible. It is during these conversations that I noticed a common theme among the things that annoy the banker. It is interesting because for over 20 years, I was on the business owner side of the desk. Not only that, I was guilty of some of their annoyances.
Let’s take a peek at the top 5 things I learned.
1. No loyalty to the bank
It is true. Your banker would prefer you to show a high degree of loyalty in your banking relationships. Most business owners don’t look at it that way. The typical small business owner has about 15 different bank products that he/she uses in both their personal and professional life. Rarely are they all from the same bank. Just look in your wallet or pocketbook and you may find a couple of different sources for your credit cards. Then take into consideration your checking and savings accounts, any loans, or investment accounts. Small business owners “diversify” their accounts sometimes on purpose, sometimes out of necessity. If the truth be told, your banker could handle most of those and strengthen your position and relationship in the bank. However, for a small business owner to do this, they need to have the confidence that the bank is acting in their best interest.
2. Take too much out of the business
Yep, we do. We have other needs for the cash that sits in our small business. Besides, our accountant tells us to do this to reduce our tax exposure. Unfortunately, this issue is where the banker and the accountant are on opposite sides. Both of them have your best interest in mind and it is up to the business owner to balance the two sides of the argument. The accountant wants you to reduce your equity to minimize your taxes. The banker wants you to keep more equity in the company, so he can give you the debt your need to operate and grow the business. You won’t always need debt, but if you can forecast out the need in advance, you can adjust your distributions and personal expenses to meet the lending criteria of the bank. If you don’t need debt; then by all means reduce your tax liability.
3. Wait until it’s too late
This is probably the most frustrating part of being a banker. Working with a small business owner who was too far gone by the time they reached out for help. It is a no win situation for everyone. Most business owners don’t understand enough about the cash their business needs to operate and continues to create a huge mound of losses before looking for a solution. At the first sign of trouble, reach out to a banker or accountant for help. You may not like what they have to say, but with your focus they can help.
4. Unprepared to work with the bank
I have heard hundreds of stories about small business owners that walk into the bank with a box of receipts or a general ledger books expecting the banker to put together their financial picture. Banks already battle an efficiency problem and are seeking every day to find ways to make our banking tasks faster and simpler. A box of jumbled pieces of paper or a hand-written business ledger is a picture right out of the Great Depression. Not only is this antiquated, it also makes putting together a loan application dozens of hours of work. The speed of business has enabled even the smallest of banks and business owners to move with agility and flexibility. There are numerous accounting products on the market, some of them free, for the small business owner to organize his financials and present a professional package for the bank to evaluate. Invest in technology that helps you work better with the bank. Then take it a step beyond organization. Ask your banker to tell you about the key criteria they use to evaluate a loan application. Then use that knowledge to position your company for the best possible probability of your application being funded when you ask.
This is probably the most common complaint about both bankers and business owners. Imagine both of them pointing the finger at each other, when having a discussion about a business. D.U.M.B. doesn’t mean that a person is unintelligent. It means the small business owner is good at his trade, but not a financial manager. It’s like you are telling the banker “I Don’t Understand My Business”. They see it in the way you present your financials, can’t describe how you make money, have no plan for the future, or operate well below the industry averages. As a small business owner, you have to be the leader of your financial future. That means understanding the cash drivers within your business and understanding how to best use debt to grow. This is about education. Find ways to learn about the dynamics involved in your financial statements. There is a wealth of experts, articles, videos, seminars, college courses, etc. Take advantage of the information that exists to be the expert society thinks you are.
Too often we don’t take the time to understand why a relationship is stalled or failed. When I hear stories from bankers about business owners who fall into one of these categories, I challenge them to take the first step in helping the business owner do better. It is not good enough to harbor the complaint, or walk around not knowing a complaint exists. Engage in the relationship and help each other be better. Our economy will thank you for it.