If you are trying to scale your business or get your credit profile together so you can buy a property or a car, then this might be the most important post that you are ever going to read, and here’s why:
Did you know that perhaps one of the easiest and fastest ways to achieve all your financial goals so you can become financially independent is by first building a better banking relationship?
Let me explain…
The Conductor, a public-private partnership between the University of Central Arkansas and Startup Junkie, organized a Banking on Success Workshop where three local bankers discussed the value and support banks can offer to small business owners.
According to them, bankers are an underused asset for startups that need funding or financial advice.
However, having a solid relationship with your bank makes financing business easier. But just like in most relationships, it will take time, attention, and, of course, proper communication.
Below, you’re going to learn the importance of building a good banking relationship so you can gain advantages in your business ventures.
We’ll also provide tips on how to keep your banker close to help you achieve your financial goals.
Benefits of Building a Good Banking Relationship
Whether you are a new entrepreneur or an experienced business owner, your bank is still your biggest ally.
Having a great relationship with your banker is like having the best neighbors who are always looking out for you. They are close to you, know your business, and want you to succeed.
However, the truth is that not all banks like to have an active customer relationship.
As stated in a J.D. Power and Associates survey, about 1 in 3 businesses with annual sales of $10 million reported having no contact from their bank.
The survey also said that business owners actually want to be contacted by their bank to receive economic and financial tips on partnering with other businesses and operations.
About 76% of small business owners said they would like to have been contacted to receive guidance from their banks, and only 15% said they are getting financial advice from their financial institutions.
Paul McAdam, Senior Director of Banking and Payments Intelligence at J.D. Power, also stated:
“They are looking to their banks for guidance on things like available credit, tips to reduce fees, and technology that can benefit their businesses,”
“This scenario presents an enormous opportunity for banks to deliver comprehensive advice that takes into account a full understanding of the company’s business goals and shows real, committed partnership.”
Finance is a sensitive subject. A business owner’s bond with their banker is one of the most important things when maintaining a good company.
If you’re still not convinced that a good banking relationship is crucial, here are a few reasons business owners should maintain a healthy and positive working relationship with a bank:
Liquidity Crisis
Liquidity crisis has been the culprit for a lot of companies going bankrupt. These companies run short of money to pay off their debts.
To avoid this kind of crisis, companies should thoroughly plan out their cash needs based on the worst outcome and ensure they have back-up credits.
Having a backup can make the difference between thriving and going bankrupt.
That’s why big companies work hard together with their banks to equip themselves and learn to fight off possible financial crises.
With a strong relationship with a banker, he can provide suitable loans and an astonishing insurance plan.
Business owners should be prepared for anything that might happen. What if the economy declines and your business takes a big hit?
Will you be able to get through until the economy recovers?
A good relationship with a bank and a smooth borrowing history can make a difference and save your business from failure.
Insurance Plan
Most companies are advised to have a secured backup line of credit. It’s basically like insurance.
In this way, the bank gets to be familiarized with their clients or debtors, and your company will also become knowledgeable about the loan process.
Companies with close relationships with their banks are also less likely to be denied credit. James Vickery, the Federal Reserve Bank of New York, stated in his study that:
“At the onset of the crisis, I found firms with close bank relationships were less likely to be denied credit by banks, less likely to report that bank credit availability had worsened, and less likely to cite lack of bank finance as a cause of declining firm output.“
“Banking relationships hold the promise of cheaper and more plentiful finance by reducing transaction costs and ameliorating informational problems.”
The time for businesses to build a good working relationship with their bank is when they don’t need it. Planning for the worst means support will be there when you need it.
A strong banking relationship can be a great turning point when analyzing credit or funding choices.
A bank or a banker knowledgeable about your business’s financial status and potential is more likely to help you get great credit and loans.
Building a good banking relationship can help secure crucial funding for start-ups or for those trying to expand.
Your most trusted bank can also help ensure you get the correct financial products and services to support your business grow and run properly.
You’ll be able to see the impact of a good relationship with your bank during tough economic times.
That’s why it’s best to start laying down some foundation as soon as possible.
6 Ways to Build a Strong Relationship With Your Bank
There are various ways to build a relationship with your bank. For example, being loyal and consistent with your bank is one of the best ways to strengthen your relationship.
Without further ado, here are seven ways to build a strong relationship with your bank:
Be Honest and Transparent
Before stepping into a bank, having your goals straight is important. You should be clear and honest about what your needs are.
Do you want to invest? Do you need a loan?
Are you trying to save? Or would you like to improve your credit score?
Having your goals set will make things easier for you to communicate with your bank. It also shows you’re a serious, eager, and reliable client.
It’s important to alert your bank immediately if there are any issues. Give transparency not only in good times but also in bad ones.
Besides, everyone will experience speed bumps every once in a while. It’s part of running a business!
Do not hide any information that can ruin your credibility. Being honest and transparent can help strengthen your trust and relationship with your bank.
Consistent Communication and Engagement
Talking to your bank regularly is another way to strengthen your relationship. Keep in touch with the staff and your financial advisor.
If you want to take a much bigger step, you can always introduce yourself to the manager or president of your local bank.
Tell them you’re in it for the long run and looking forward to building a strong and healthy relationship with the bank.
Engaging with them consistently and positively will help you grow and transform from a client into a friend. A banker can’t support or have your back if he has no clue who you are.
Proper Research
Every bank is different.
They differ in specialties, fees, rates, and service. Do your research before going to the nearest bank.
Picking a bank is like choosing one of your partners. You’d have to work with them for a long time.
List down your possible candidates and compare the banks’ features. Look for a bank that you believe best fits your business.
Pay on time
Paying your dues and loans on time is one of the most important and effective practices for developing a strong relationship with a bank. In addition, you can improve your credit score as well.
You should avoid late fees, penalties, and interest charges to have a positive connection with your banker.
Paying on time makes your banker think you’re responsible for managing your business and finances, showing you’re a reliable client.
All of these positive traits can help you in the long run. For instance, if you ever face a financial crisis, your bank will be more willing to assist you and offer some assets.
Tips to Help Pay Bills on Time
If you’re having a hard time paying your bills on time, read these tips below:
Set up autopay
One of the easiest ways to ensure you pay your bills is by setting up automated payments whenever possible.
For credit card users, you can set up your bills to pay the statement balance, minimum balance, or a specific amount every month.
Create Calendar Reminders
It’s helpful to track your bills’ due dates through a calendar, Whether through your phone or a physical one.
If you’re using your phone, you can easily add specific payments there. You can even set an alarm on that date to remind you about your bills.
Decide how much you want to pay
Looking to buy a new phone? Before swiping that card again, consider your monthly expenses.
For instance, calculate your rent, utility bills, emergency funds, insurance, and other credit card payments.
Plan a budget that works for you by allotting a portion of your income to your monthly dues.
Adjust Due Dates
Some people struggle to pay their bills on time due to the different alignments of due dates and their cash flow.
Fortunately, some creditors or lenders are okay with changing your due dates.
Try Debt Management Plans
Consider debt management plans if you really want to pay off your debt. Nonprofit organizations such as Take Charge America and InCharge offer these plans.
Loyalty
Loyalty should be in your DNA. Show your bank that you’re consistent and faithful only to them. Show your loyalty by sticking to just one or a few banks.
Call for their services regularly. Being loyal can show the bank you are a valued client, boosting your chances of earning better deals, discounts, and other rewards.
Give feedback and appreciation
And lastly, another great tip to help build a relationship with a bank is to provide feedback. Share any suggestions or complaints so you can also support the bank’s growth.
Giving appreciation is also a great thing to establish a positive relationship. How can you give appreciation? You can provide referrals! Advertise your bank to friends and family members.
You can also send thank you notes to express your gratitude.
Your Company Needs a Better Banking Relationship: Final Thoughts
All business owners benefit from a better banking relationship. One of these benefits is that you’ll have a strong backup when experiencing a financial crisis.
Also, they’ll be able to guide you on hand with different products and services.
Building a relationship with your bank or other financial industry is very important. However, it will take a ton of work.
A healthy and positive relationship shows that both parties are benefiting and growing.
With these techniques, you can create a long-term bond with your bank to help you fulfill your goals.