The Importance of Solid Relationships With a Lender: Start Early Before You Need Them

When you talk to lenders, often you will hear that lenders wish more businesses built ongoing relationships with them.  A strong relationship with your lender can be vital to the success of your business. Your lender should be someone who understands your business as well as someone you can turn to for advice. They should be able to offer solutions for various problems you might be experiencing and importantly, your lender is your key to getting the access to the capital that your business needs, when you need it most. The better your relationship with your lender, the better they can understand your business to offer advice and solutions so you can get the capital you need.

To create a solid relationship with your lender, you should begin long before you apply for a loan. You can do this by starting to do business with the bank regardless of whether you own a large or small business. Spending time with the business banker at your local branch allows you to develop and nurture a relationship that will benefit you for years to come.  Don’t just head to the teller window.  Make it a point to go to your small business contact there.  They want to get to know you too!

Knowledge is key when working with a lender.  It is important for them to really understand your business. Who are your customers? Who are your vendors? What is going on in your industry?  This same knowledge allows them to use this knowledge to correctly assess your financial situation.  This can be comparable to a long term relationship that a doctor has with their patient. Where the doctor can give health advice to a patient based on their health history, a lender can give health advice about a person’s business based on the information that has already been shared.

“Probably one of the most important things about building a relationship with a banker, an individual banker, is the trust factor says Brian Moeller, Senior Vice President , Director of Small Business Banking for Wells Fargo & Company.  That’s something that is hard won and easily lost, and you just don’t get that with a stranger.  It comes over time.  It comes over needing help and having somebody come through for you, or getting some advice and following the advice and have something great happen.  Then, it’s like, ‘Oh yeah, I’m going to recommend my friends to Brian because he steered me in the right way when I was having a tough time.’  That trust is ultimately what builds a good relationship.”

A banker can walk their customer through a balance sheet analysis and explain how the bank sees their finances and business. A strong relationship with your lender can enable the bank to understand your personal assets vs. your business assets and where you and your business need the money to go to grow your business. If a previous relationship did not exist, this process would take significantly longer because they would be just starting to get to know you. This process also allows for a higher degree of trust between you and your lender that extends in both directions. With this higher degree of trust you can believe in your lender’s advice while they trust in your ability to repay your loans.

One of the benefits of your relationship with your lender often comes in the form of time.   According to Jeff Stibel, CEO of Dun & Bradstreet Credibility Corp., “Start way before you need anything from a bank.  Start when you can start giving something to a bank.  Build that relationship, get that relationship strong and then when you need something they’ll move, and they’ll move very fast.”

If you have a relationship with your lender, you do not have to start from a blank slate when asking for a loan. This means that the answers to your questions will come more quickly.  Sometimes the quick answer will be a ‘no’, but if you have a strong relationship with your lender, you can be confident that you are probably getting  good advice for the future of your business.  They may also be able to offer you that much needed loan and then get it fast tracked because of the long relationship that they have with you and your business and their ability to articulate your business in the approval process.

You can gain knowledge, experience, and information when you have built a strong foundation with your lender.  The relationship that you have helped craft with your lender allows them insights into your business to know whether a loan is a good or bad idea. Remember,  you are both a part of your community and often there are networking benefits to keeping a dialog open.

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