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A slow economy allows business owners to focus attention on areas they may neglect during boom years; now is a great time to strengthen your relationship with your banker, says Steve Lumley, president of LGI, an outsourced CFO firm based in downtown Cincinnati.
LGI has provided financial management services for hundreds of privately-held businesses and nonprofits over the past 20 years. He gives the following advice to entrepreneurs and business owners who want to improve their banking relationships:
* Business owners should meet with their bankers periodically, and even socialize with them from time to time, Lumley says. Why? Because a good banking relationship affects the lifeblood of your business.
"Your banker needs assurance that your business is going in the right direction," says Lumley. "Bankers work off thin margins, so their loss threshold is very low. Keep your banker informed about changes and innovations in your business."
* When you visit your banker, take your CFO with you, Lumley advises. "You wouldn't go to court without an attorney; don't visit your banker without your CFO," he says. "Your CFO can explain changes in your business in a fiscally-strategic way."
* Consider your banker a strategic partner in your business-along with your lawyer, CPA and CFO, counsels Lumley. "Bankers work best with borrowers-- even in bad times-- when there is an open and honest dialogue," he says. "A business owner should be honest about problems, because bankers-like all businesspeople-are most comfortable when they know the borrower is a straight-shooter."
Your CFO can help a business owner highlight both the positive and negative changes in your business, and explain to a banker clearly how the company is dealing with challenges. "When there is mutual trust and respect on both sides, more gets done and problems are solved easier, even in challenging times like these," he adds.
*Ask your banker if anything in the underwriting criteria has changed. "How is your bank dealing with-or has dealt with-the criteria, and how will its actions affect your relationship?" he asks.
* Make certain your banker understands your business, is responsive to your needs, and you have a good rapport with him or her. If all those factors are in place, then you have the right banker, Lumley says.
A good relationship with your banker-like any business or personal relationship-is strengthened by honesty and regular contact, Lumley concludes. "Entrepreneurs sometimes tend to focus on selling when they need to talk about the reality of accounts receivable,"he says. "Your bankers, CFO and you should be in the same communication loop."
Despite what entrepreneurs read in the national press, local banks are loaning money, Lumley says.
"LGI knows banks that are interested in helping privately-held businesses improve cash flow by making loans," he says. "We are expert at working with bankers so they feel comfortable in providing working capital for businesses."