By Bruce Fischer - Tuesday, November 3rd, 2009

Be honest, forthright and sincerely committed to establishing a relationship of mutual trust and respect.

This golden rule can apply to just about any aspect of running a business, from communicating with staff to dealing with customers and suppliers. But it is just as vital to the relationship a business owner has with their banking institution. When the market sours, the bank can be the lifeline that means the difference between throwing in the towel or hanging on until conditions improve.

Too often business owners engage in a purely transactional relationship with their bank to serve the day-to-day and monthly needs of their business. The bank may have a poor or limited understanding of the business, the markets its serves and the typical cycles it endures. When the business is struck by tough times and finds itself going hat in hand to the bank to secure credit or re-negotiate the terms of a loan, it may not find the help it needs.

It is always more difficult to solicit sympathy – and more importantly, help – if you wait until the situation is desperate to begin the conversation. Banks want to mitigate risk and ensure their investment in your business will not end up accounted for in their loan/loss provisions. Your desperation makes them nervous.

To establish a positive relationship with your bank and ensure the help will be there when you need it most:

• Understand how your bank works. Most banks have a range of services tailored exclusively to businesses of various sizes and scope. Understand where you fit as a business customer and who has responsibility and decision-making authority over your account. Not just the title of this person, but who they are by name.
• Get to know this individual. Sit down and discuss your business with them. Often, this person will be more than willing to pay a house call and discuss in detail your business and its current and future needs.
• When times are good, secure a line of credit. Build a track record as a reliable customer by regularly drawing on it and consistently paying it down.

Keep your bank honest

On the other hand, your bank is in business to serve you, the paying customer. Approach this relationship with the legitimate expectation that you deserve and can expect attentive and courteous service. You do have the right, at any time, to take your business elsewhere.

Our banking system is typified by a fee-for-service structure. Businesses in particular are on the hook for Visa/Mastercard merchant fees, points rewards plans and other costs which nibble away at margins. Beyond these are the fees associated with everyday banking transactions, the interest rates on credit cards, and of course, the cost of borrowing through a line of credit or a loan.

Most if not all of these costs are negotiable to some degree. Having established that track record as a good customer through timely payment of your bills, combined with years of loyal patronage, deserves to be rewarded with better rates and reduced, if not waived, fees.

Banks, however, are often slow to offer such rewards unless you make a point of asking for them. Don’t be afraid to shop around and see if you can find more competitive terms elsewhere that you can use as polite, but firm, leverage. Your bank, just like your own business, should be willing to give a little to keep a good customer rather than have to find a new one.

Category: Expert Advice.
Industry: Retail, Technology, Services
Functional Area: Finance
Tags: banking, banking fees, banking services, business banking, cash flow, commercial banking, dealing with banks, line of credit, managing costs