Why Spend Time Loving Your Bank ?
PAY ATTENTION TO YOUR FINANCIAL NEEDS
It’s highly unlikely that you will ever love your bank however right now you need to pay attention to what is happening and consider what your financial needs may be in the future.
The Royal Commission has caused a tightening in the way Banks are lending for home loans, investment loans and small business loans. Part of this is an overreaction and part is a tightening that should have always been there in the way banks assess the capacity of individuals and businesses to repay loans.
Borrowers are finding it considerably harder to get a loan these days and remember this is during a very low historic interest rate environment….so one day there will the extra impact of more normal rates and greater scrutiny of your income to repay both interest and principle.
So while you do not need to love your bank you do need to plan for when you might need them and pre consider what they will expect of you to demonstrate the viability of your business and your capacity to repay.
When you go and see a prospect you invest time in first considering what problems they have and how you might solve them. So the logic here is no different.
BE PREPARED TO INFORM YOUR BANK
Keep you Bank informed about your business and your likely needs by providing to them your Business Plan and actual to forecast profit and cash flow…or at least make sure these are assembled and updated regularly in a way to impress the Banker with your financial management focus used to inform and run your business.
Just like you do with your clients think about the questions they might reasonably ask and be prepared for them.
Do your homework:
- Prepare for the engagement by first asking yourself what they are likely to ask you and why
- Be concise about what your business is/does, who your competitors are, why you have a unique selling proposition, why you can continue to Win.
- Be concise about what you need and why.
- Test and refine all of the above with others you trust for an honest answer, before you engage the Bank.
- Provide a context for what your broader needs are going forward
- Identify the risks to your business and how you intend/mitigate them
- Have the last 2 years financial statements available to demonstrate you can service your commitments from surplus operating income
- Prepare a cash flow forecast that takes into account the new loan(s) you are seeking, the wider context of your needs in the future and some contingency for the risks you have identified
- Compare the general terms and conditions of your Bank with the market to see if interest rates, fees and terms are comparable. (remember though there is a lot more to it than interest rate as you want a Bank to get you and your business)
BUILD A RELATIONSHIP WITH YOUR BANK
Why spend valuable time on doing this?
Firstly, remember you will need a Bank at some stage for some or all of a home loan, overdraft, working capital, cash flow lending, equipment and vehicle finance, commercial loan, credit/debit cards, FX, trade finance.
Secondly, Banks have stuff and more than you think they have...for example they have analysis and research articles and statistics, they have regional managers who know your market and your competitors and will have idea’s where gaps in your market that are underserved may be.
Plan and prepare for making the best from the relationship by thinking about what they might need from you before you engage with them.
Getting this right will make the process faster and more efficient and should impress them about the type of person you are and be a solid reflection of where your business is and is heading. The key thing that you should be expecting from a Bank is that they explore the overall context of your needs not just the single transaction that maybe the immediate need. If you do not get this feeling then walk away and try elsewhere.
This approach is really no different to the way you prospect for new business or nurture existing clients. Prepare for the meeting and assemble the information that demonstrates you can see the problem to be solved and evidence why you are the right person to do this.
Business Strategy, Planning and assembling compelling evidence and information are the essential ingredients of good businesses seeking to become great! If you do not do these now then get some strategic help and invest your time in developing a strategy and plan for your business as it will pay real dividends.
Leigh Powell is a business strategist and mentor with yourtimematters.com.au specialising in helping businesses build a compelling proposition that solves real problems focussing less on “what” a business does and more on translating the “value delivered” to a client and the “impact” this has on their business.
Contact Leigh to discuss your strategy or have Leigh speak at your next event.