Small Business Blog

The American Bankers Association (ABA) recently published a white paper entitled, “Assessing Your Banking Relationship: Seven Key Questions.” The article is the fifth in a series of white papers intended to help small businesses obtain bank loans.

In the article, author Robert Seiwert poses seven true/false statements to help you evaluate the quality of your relationship with your bank. The purpose of this evaluation is to determine whether your bank will continue to “be there” for you, in terms of providing financing when you need it, giving you competitive pricing on financial products and services, and offering you guidance and support as you set out to achieve your business goals.

The premise of the article is interesting enough: one means of protecting your bank funding is to woo your banker, in the figurative sense. Your banker wants you to be a stable and committed business partner, and it’s up to you to prove that you fit that mold. If you aren’t making the desired impression, you will see your banker become distant and non-responsive — like a bored spouse who’s wondering if there are other, more exciting fish in the sea.

The metaphor could be fodder for a lively happy hour conversation, but that may be where the usefulness of Seiwert’s advice ends (sorry, Mr. Seiwart). You see, Seiwart concludes his commentary without any practical recommendations for the small business owner. The grand conclusion is to “seek a bank that rewards a relationship approach to doing business with them.” Here’s my problem with this advice. Establishing a relationship with a banker is like establishing a relationship with anyone else. You don’t really know the limits of that relationship until those limits are tested. You may answer true to all of Seiwart’s statements, but when your business fundamentals worsen, the dynamic of the relationship will change — no matter how great you think that relationship is. Taking the metaphor one step beyond good taste: if your business was lean and mean when you and your banker hooked up, you can expect the flame to die out when your operations get fat and bloated. And no amount of “talking it out” is going to change that.

So what is the solution for small business owners? The simplistic answer is to manage your business as if your life depends on it. If things start going sideways, identify the problems and start brainstorming solutions immediately. You might consider hiring someone to help you, realigning your business focus, overhauling your supply chain, and yes, asking your banker for feedback on those prospective actions. The worst possible thing you could do is nothing. In business, waiting is synonymous with dying.

The point that Seiwart fails to make is that it’s not enough to go to your banker with your problems. You should, instead, be going to your banker with solutions.

You can read the first four articles in the ABA’s series on small business lending here.