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“At its core, banking is not simply about profit, but about personal relationships.”
— Felix Rohatyn

We borrow a lot of money in our business, but do we really know who we are borrowing from and how the loan process works?

One of the financing basics is to get to know thy banker.

Who are these banking people, and what makes them tick?
What information do they look at to determine whether if we’re a good credit risk?
What information should we know about to better understand whether the bank will be there to support us in good times and bad?
There’s a lot we can learn about our banking partner to ensure a smooth relationship, and most importantly get the best financing arrangement possible.

The beer business is all about relationships. We have great relationships with our breweries, our retailers and our employees. It is a large part of what makes us successful.

What kind of relationship do you have with your banker, and your bank?

What do you really know about how our loan officer operates, what he looks for when writing a loan, and who he goes to for approval? Who else is involved in examining the business and making decisions about whether a loan gets approved?

If you’re like most beer distributors, you know your banker well. You golf together, attend charitable events and talk whenever you need a loan. However, you may not know your banker’s boss, or the boss’ boss. And that’s the problem – we don’t know these people higher up the banking food chain, and they don’t know us.

Aside from a set of financial statements and a one page memo from our banker, your company is just a name on the bank’s loan reports. As long as we get our loan on the terms we expect, this arrangement works fine and we don’t ask too many questions. As long as the bank gets paid when they expect, it works fine for them, and they don’t ask too many questions either.

But what if something changes? Perhaps the business takes a down turn and profits turn to losses. Your company shows up on the ‘naughty’ list at the bank. Then there are problems making payments on the debt, and we need help to re-structure. Who is going to help us then?

Or consider a happier situation, one where you want to buy another beer distributor and need to borrow a huge amount of money. The amount is far more than your banker is authorized to handle. What then?

The relationship is the thing

Let’s back up a little, and assume all is fine in your business (as it probably is). Profits are solid, cash flow is good, the bank is happy with you and your numbers. Furthermore, you have no immediate needs for a big loan, there is no big acquisition on the horizon. Now is the perfect time to build, or strengthen your relationship with the key decision makers at the bank.

First, who are these key decision makers? If you don’t know already, talk to your banker and find out. They will be happy to tell you, arrange lunch meetings and golf outings.

It sounds painful (four hours on a golf course with the credit guy from the bank?) but it’s part of building the relationship. We do this all the time with our major suppliers and key customers, and we can benefit greatly by investing time with the key people at our bank. Plus they pay for everything.

It doesn’t always have to be four hours of golf. Our process is to set up an 11am business meeting to talk business for an hour then go to lunch and get to know these folks personally. During the business meeting we review numbers, goals and objectives. We talk about the state of the industry and the direction of our business. We talk about our challenges and how the bank may be able to help. Then we go to lunch. We blend the business with getting to know them personally.

These folks are bankers, but they are people too (most of them). Bankers work well with people that they know and trust.

Get to know the key decision makers in the bank, and build a relationship. You’re not just trying to make a new friend, you’re strengthening a business partnership that will benefit your company and your financial statements.