Bankers – The People Every One Loves to Hate
In our age, bankers are portrayed as tiresome bureaucrats who
• won’t lend you the money you need,
• demand it back before you can repay it and
• overcharge you for services you don’t understand.
This is fairy-tale nonsense. Good bankers, and there are plenty of them, are hugely helpful in building a business.
Bankers Add Value
Long before the Internet, banks invented one of their own. Banks have moved money and information electronically for decades. They give us transaction information instantly and all the banking reports we could possibly need at least once a month.
Their debit and credit cards, ATM’s, telephone payment systems, pre-authorized payments, foreign exchange risk and cash management products are indispensable tools of a well-run business.
Banks are by far the cheapest source of capital in the market and they provide it to any reasonable risk. If the bank won’t lend you the money, you probably shouldn’t try to borrow it.
Believe it. Bankers add huge value. Running a business without all their services would be like heating a skyscraper with a wood stove.
How to Deal with a Banker 1: Tell the Truth
Bankers are the first to admit they don’t understand nearly as much about your business as you. It is easy to hide bad stuff from them … for a little while. Don’t.
They are your partners. They will find out about the bad stuff eventually. Once they do, they will never forgive you for hiding it.
Get ahead of bad news. It is part of life and experienced bankers deal with customer bad news all the time. Warn the banker it is coming and go in to explain it. If you are straight with your banker, they will trust you forever.
How to Deal with a Banker 2: Be Prepared
Even before you borrow, take a banker to Starbucks two or three times a year to find out about current lending practices. Later, when you walk in to ask for money, you will have crafted your request to respect these practices.
When you ask for a bank loan, give the banker the written information any intelligent person would need to respond:
• your bio,
• financial statements,
• a financial forecast with supporting analysis and
• a thorough written description of the business and assets, including its history.
Put it together so that the banker can cut and paste from your work into the presentation he or she has to make to their bank’s credit authorities. That way, you can almost write the internal bank credit application yourself.
Preparing all this will prepare you to defend your request. It will also show you the weaknesses in your case and cause you to amend it as necessary to be consistent with the market.
How to Deal with a Banker 3: Don’t Ask for the Impossible
Water cannot be made to flow upstream, snow cannot be made to fall in the Sahara and bankers cannot be made to lend outside their comfort zone. Find out what that is. Stay within it. If you need more money, you need an investor as well as a banker.
Also, find out what the lead times are. Respect them. Banks do not lend instantly. They need time. Plan accordingly.
