2/22/10

Manage Your Money Mondays - The Value of a Banking Relationship

How valuable is a good banking relationship?
Over the long haul, a banking relationship is to a business as air is to everyone: It is required!

"Keep skunks and bankers at a distance."
Humor from the Heartland


The quote above, widely accredited as "Old Farmer's Advice," is only half true. Your banker should be close -- in good times and bad. It is much easier, as well, to make a case for lines of credit or a loan BEFORE the money is needed. This is especially true now that credit has been and remains tight.

A banker who knows you will be more likely to help you. Small business bankers are increasingly creative these days. Certainly credit has not become any easier to get, but for a business owner with personal assets to use as collateral, and a decent credit score, money can be had.

One cautionary note: Make sure that the credit line is used to support activities that will replace the funds. Working capital to cover cash flow needs tied to customer orders is one good use. Cash requirements just to cover payroll, on the other hand, may not be.

Also consider forming relationships with multiple banks. The financial meltdown of 2009 bears out the wisdom of this approach. If you were a customer of a bank that had to tighten lending, you were at risk of being left high and dry in the credit arena. This article from Business Week "Multiple Banking Relationships" clearly makes this point.
Entrepreneur.com suggests "aggressively managing cash flow" as another tactic for both building strong banking relationships and business survival in "Grow Your Cash Stash by Managing Cash Flow."

Talk to your banker regularly. The good ones will share information and insights on how things work in their bank or credit union. Your business will be better off for it.


E-mail us with your questions, or leave Comments below, about how to reach your business goals.

© 2010 DMMI Associates LLC – All rights reserved


1 comment:

Nitin said...

If you are organizing meetings you can use online meeting minutes tool at http://minutesofmeeting.net. Its very robust, easy and simple way to capture, distribute & track meeting minutes. I am using it since 1 year and its really helpful.