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The Relationship with your Banker - « back to Articles

A business owner will typically turn to a chartered bank or Credit Union for the bulk of their business financing. There is an importance to forming a good working relationship and staying on positive terms with your banker.

Your banker will insist on knowing your business before you will receive a loan; making them a helpful source of ongoing management information and expertise. If your business runs into a serious difficulty that prevent you from meeting your financial commitments the confidence that your banker places in your ability to overcome your problems could mean the difference between surviving intact or falling apart.

The banking industry has changed in many ways in the recent past. Laws governing the conduct of financial institutions have changed. Foreign banks are now permitted to operate in Canada and government guaranteed loans to small businesses are much more common. These and other changes have brought competition to the business of banking. Most major bankers have moved to promote their commercial banking operations by creating special centres for lending.

Owners should engage in a periodic review of their bankers and lending institutions. There are differences and you may be able to achieve better terms or packages at another institution. Before you change, however, be sure you weigh potential benefits against the loss of a possibly long standing relationship with your bank.

Choose the right banking institution by considering:
  • Selecting your bank as you would a supplier.
  • Looking for the bank that provides a combination of price, quality, and service that suits you, not just the most convenient location.
  • If you are seeking financing review the bank's policies and assure yourself the bank has the terms that you will need.
  • Whether the bank staff have expertise in your line of business.
  • Asking leaders in your industry where they do their banking.
Consider your prospective banker's ability to win loan approvals from head office. If you live in a smaller centre, your loan application will probably will go to a central office for approval. In that case, you must be confident that your local banker can act effectively as your advocate.

Keep in mind the following guidelines when requesting your loan:
  • Before you meet the banker know how much you need and the terms you need; present a thought out and polished written proposal.
  • They will ask for security so before you approach them review your securable assets.
  • Take the initiative with your banker. Issue an invitation to your premises and offer your Business Plan or a comprehensive assessment of your business's past performance. Include future prospects backed by financial statements.
  • Keep your banker informed on your progress and how you are overcoming any problems.
It is in your bankers interest to see your business succeed. Careful selection of the your banking institution can be an important component to your on-going business success.
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