If you think about it, running a business is largely about building relationships. And establishing a solid banking relationship is one of the most critical moves you can make as a business owner.
When is the appropriate time to begin forming this relationship? According to CPA Nick Magone, Managing Partner of Magone & Company, “Immediately — before you need the money.”
Get the ball rolling on the relationship
Banks typically offer three levels of financing:
- Branch level – up to $250K
- Small business lending – $1-5 million
- Middle marketing lending – Over $5 million
To get started, reach out to your branch manager, and they’ll introduce you to the correct contact for your future lending needs.
Become the ideal borrowing candidate
What are banks looking for? First and foremost, if your business isn’t profitable, or isn’t able to show a track record of profitability, the bank will not loan you money. Remember, the bank is not your business partner.
Banks also need to have a clearcut understanding of your business and what it brings to the table for them. For example, how many of their services will you use? Will you need their treasury or cash management services in the future? In other words, they are looking for a profitable relationship. Bankers are more than accommodating to get to know you, especially if there is business to be had.
The first meeting
While in-person meetings are preferable, a video meeting can be just as effective for introducing yourself and your business. A typical presentation may include:
- An overview of your business and management team, including who you are and the number of years in business overall.
- The market your business serves, including the top 10 suppliers and customers.
- Your high-level budget for the year, e.g. cost of goods sold, wages, administrative costs, etc.
- The performance of the budget, as well as the trend for expected revenue and profitability throughout the year.
- Future plans for growth, acquisition or inventory that may require financing.
The takeaways
Says Magone, “The three main points to keep in mind: Get to know your banker before you need the money; invite your banker to a meeting before you need the money; and, profitability and performance are key to having your loan approved.”
30 years of experience and expertise
In celebration of our 30th year in business, we’re rolling out a series of educational videos to help busy executives, families and business owners meet their accounting and tax needs and achieve their financial goals. Check out the latest on our YouTube channel.