The bankers you work with may seem like great men and women, and they probably are truly nice people. They greet you by name, ask about your spouse and kids and appear to take a real interest in how well your enterprise is doing. Their financial products may be meeting your needs to a T.
But how strongly do you feel about your relationship with your bank? How do you think they’ll cooperate with you when the stuff hits the fan — which it most certainly will at some point? That’s the real test.
Here’s a true-life example: I’ve been working with an entrepreneur who finds himself in a down cycle. The company’s business plan is sound, the management team is experienced, and the product remains viable, so the problem isn’t terminal. But it may be awhile before the company’s prospects brighten.
The company works with a popular bank, which is starting to get nervous about its loans and is considering adding demanding conditions or even calling the loans.
The entrepreneur, however, feels a sense of loyalty to the bank, which has worked with him for several years. I have counseled him to consider other options. The reality is that bankers seven states away that he’s never met, not his local team — are the ones making the decisions.
He’s holding fast– and that’s a big mistake.
The entrepreneur has the opportunity to move to a smaller, regional bank. That bank’s rates may be slightly higher, but they’re more interested in a relationship.
And there’s certainly value in being in the room with the actual decision-makers — for both sides. Yes, your financials are going to be the primary determinant in lending decisions, but the human element can sway an on-the-fence lender to your team. Meantime, you’ll be able to tell a lot about the banker by meeting in person. Sometimes, it’s okay to trust your gut.
Loyalty only takes you so far
I get why entrepreneurs are loyal to bankers that have brought them success, but passing up the opportunity for a better financial situation is a kin to resting on your laurels.
As an entrepreneur, your best chances for success are by finding every possible edge you can. Incremental gains add up nicely over time, you should be taking advantage of them.
As for your spurned banker — they will get over it. Yes, that’s cynical, but that’s the way the business world works, especially with the larger banks. Remember also that your financial needs are a living, changing thing. What worked for you at one point may not be the most appropriate thing for you now.