One of the biggest things bankers have difficulties with when evaluating new clients is their ability to clearly and accurately communicate where their business is going and what their plan is to get it there. Understanding where you are and where you are headed and how a banking relationship is going to fit into that plan helps bankers decide the best ways they can partner with you.
When creating a plan that you are going to communicate to a potential lender, there are three things that you need to focus on:
- Part 1: Communicating Where Your Business is Going
- Part 2: Communicating Your Business’s Vision Through Strategic Planning
- Part 3: Communicating Why You Need Funding
Communicating Why You Need Funding
With communicable goals and a strategic plan in place, you now need to be able to communicate to potential lenders why you need funding. Here are a few considerations you need to make.
Be Calculated & Concise
Telling a banker you need a revolving line of credit because you have times you are short on cash is not going to convince them to approve one for you.
It is much better to explain to the same banker that your cash shortages are due to differences between the credit terms you can offer and the credit terms you get from your suppliers and that you know the average amount of time these shortages last.
Better still would be to explain that you know how long it takes at your average margins for cash flows to become positive so that you could repay draws on a line of credit.
Even better would be to describe and support with data how being able to borrow in the short term could help bring in more business and increase margins resulting in faster repayment.
The more specific you are and the more you can back up your explanations with real examples and data from your business, the more likely you are to convince a banker to give you what you need.
Offer Explanations
If there are anomalies in your business, be able to explain those to your banker.
Ups and downs are a part of doing business and sometimes cannot be avoided.
However, when anomalies do occur, the better you can explain their impact and provide clear-cut plans to compensate, the better position you will be in with your banker.
If your business is not quite where you want it to be, it does not mean your banker is not going to be able to help you. Being able to explain the current situation and a good plan for moving forward helps.
Your banker wants to help your business thrive, not serve as a short-term solution for insolvency.
Sometimes these situations can be worked through if your banker is able to find a way to minimize their risk through a clear understanding of your situation.
Consider Your Banker as a Partner
The best banking relationships are partnerships that help a business thrive while minimizing risk for the bank.
Good bankers understand this and focus on creating and nurturing these partnerships.
Good banking clients understand how to use their banking relationships to thrive.
The bank has to operate in its best interests and you have to operate your company in yours.
You have to find the medium where your banker is providing you what you reasonably need while giving them the comfort that the relationship represents minimal risk to the bank.
Just like any partnership, there must be an openness and a willingness to reach a compromise in certain situations. Be open and honest in your communications with your banker and expect the same from them.
Have Questions? We Have Answers
Understanding where your business is going, having a good strategic plan, and being able to effectively communicate your needs, vision, and plan to your banker are a good foundation for building a good banking relationship that will help your business grow.
By lending your business money or giving you short-term access to working capital, your banker is in effect investing in your business.
Treating your banking relationships with this perspective is the first step towards being able to access the capital you need to maintain and grow your business in the future.
Are you having difficulty developing your strategic business plan? Let us help! Contact us now.