How Close Should You Get to Your Bank for Business?
Almost every business utilizes some type of lending institution which is usually one of the major banks for their business. It can be on different levels. Some companies use their local bank just for the receivables and payables, while others use them from this and payroll and whatever other business services they have to offer. You would think as a business owner that being as you are a good customer of this financial institution and perhaps for many years, that if it can time that you needed a business loan you would get it no problem.
When that time comes though you may not find it nearly as easy as you anticipated. The banks although still high profit makers are being a lot more choosey as to who they lend money to. In order to get that money it won’t be just a matter that you have been a long time customer in good standing. The rates will be higher, and so will the fees. You may find that you need to put up more collateral then you thought to secure the loan. Even the industry you are in could be a factor.
What may help is if you build a business relationship with your Bank by speaking with your loans officer before you actually need any funds. Make sure you establish a line of credit which you only use if absolutely necessary. Discuss your business with this bank officer and tell them what your business is about and how you plan to keep your business solid in the future. Even though this may not be required information in order to establish your line of credit, you are keeping your bank informed, and you are building a more personal business relationship with them.
If you do need to increase your line of credit don’t do it as a last minute thing. Give them plenty of notice so they don’t get the impression that your Company is headed into a downward spiral that is going to make them nervous about increasing your credit limit.
If you bank gets to know you they may be more apt to lend you money even in small increments like increasing your credit line during various periods of slow times. Make sure that each time you are increasing your credit line, or if you are going after a small business loan that you have all your facts and figures straight. This is where your accountant can help you by making sure your financial statements are current. If you have a solid plan for the future of your company then the bank is more likely to give you what you are asking for. Partially because you have kept them informed prior to the need for this funding.