The unfortunate reality for SMEs is that there is not a lot of room for negotiation with your bank. This imbalance of power is succinctly explained by the Golden Rule .… “whoever has the gold makes the rules”. Let’s face it, you need the bank more than they need you so guess who makes the rules? This means you should avoid any kind of behaviour that will get them offside such as:
Not keeping your banker fully informed
Its hard work keeping your banker up to date with what’s happening in your business and industry especially when bankers seem to change so frequently but the investment is definitely worth it in the long run. Communicate regularly and don’t tell your banker what you think they want to hear, this is never a sustainable strategy. An uninformed banker represents a threat to you and your business. And an ill-informed banker is even more of a risk. Honesty is always the best policy. If you tell mistruths, you will get your banker offside instantly.
Not delivering on commitments
Reflecting the Golden Rule, credibility with your bank is easy to lose and hard to earn. It might be a periodic loan repayment or sending in annual accounts by a certain date but if you fail to deliver your credibility suffers. So be very careful about the commitments you make and always err on the side of caution – under promise and over deliver. Of course it’s not always possible to deliver on what you committed to when you signed the bank’s offer letter. Circumstances change and profit and cash flow forecasts are just that but it’s your responsibility to deliver on that which you signed up for. Businesses rarely get into trouble when they meet the bank’s terms and conditions they agreed to.
Go overdrawn without prior approval
This is probably the quickest way to blow your credibility because usage of your current account is the first and best measure your banker employs when evaluating your risk profile. If you go overdrawn without your banker’s prior consent this will immediately get them offside.
Failure to respond to emails/phone calls
Even if your banker doesn’t return your calls or emails as promptly as you would like (or at all), if you fail to respond when your banker makes contact it wont help your cause. Remember you need your banker more than they need you so even if they don’t return your calls you still need to return theirs.
Go over his/her head
If you don’t get the answer you want think carefully about going over your banker’s head. This remains an option but it should be carried out only as a last resort and when you are totally in control of your emotions. Bear in mind too that your banker is nearly always the messenger and not the decision maker. If you shoot the messenger, how and who will advocate for you with the decision maker?