Since I’m not a banker, it may be presumptuous of me to say what they want. However, years of experience in working with bankers has taught me some important lessons.
Bankers thrive on relationships. Business owners have traditionally cozied up to bankers when they needed capital and shunned them when they didn’t. Yet, your chances of getting a bank loan improve dramatically when you have an ongoing relationship with a banker. A standing relationship also increases the speed of loan closing. Maybe you don’t have a relationship with a banker now, but it’s a good time to start one.
Relationships thrive on trust. The basis of any good relationship is trust, and that goes for your banking relationship, as well.
Experienced bankers understand business, because they see the same issues all the time. They don’t expect your business to be perfect, and being open about your business problems can be a relationship-builder. For example, bankers appreciate that identifying, hiring, and retaining qualified staff is an enormous challenge. On the other hand, they expect you to have a keen grasp on your financial condition. In other words…
Bankers want to know that you understand your business. Your written business plan and your financial statements must be straightforward, easily understood, and consistent.
Can you or someone on your team reasonably answer any question about your financial statements? What does this account represent? Why is this expense so much higher than last year? What is this number? Your credibility will be greatly enhanced by efficiently answering these types of questions.
Bankers are clamoring for qualified borrowers. In the current environment, banks have plenty of capital to loan to qualified buyers. They are earning high spreads on loaned capital and there is significant political pressure to help businesses create jobs.
To demonstrate that you’re a qualified borrower, you will need to show a positive history and a convincing plan for the future. Yes, these are fuzzy concepts, which is why the previous points are so critical.
Be your best. Run an honest business, and be financially conservative when it comes to the money you take out.
If you are seeking to mask your business problems with more cash, your banker will certainly notice. While a bank loan may assist your steps toward ongoing improvement, it is not a substitute for business discipline.
While my list of “what bankers want” is not comprehensive, it is a good starting point for you to evaluate your positioning to acquire debt financing. I welcome feedback from bankers and borrowers, alike.
Do you have an ongoing relationship with a business advisor who helps you get better every day? Your Counterpart CFO is on your team.