We all need a place to bank, and we probably all need credit of some kind. As an entrepreneur or independent consultant, especially during the first few years of start-up, we often really need a flexible and understanding bank. That begins with your (new) bank manager.
Sometimes we assume that the bank, any bank, will help us make the right decision for all of our banking and investment needs. After all, is that not their job? The advertisements certainly make them seem welcoming and knowledgeable. Most banks these days even have some sort of support for small business, which is great. But as much as it is their job to help you get set up and establish credit for the new company, they are frankly there to make money for the bank. The bank takes your money and invests it to make its own money. Most of us do not necessarily begrudge them for this, even though we all hate service fees, but we want to make sure we are getting what we truly want and need. We need to understand they are going to help us and our fledgling business to the best of their ability.
So how do you and I know whose interest they are serving?
Here's my advice:
1 - Do your homework. This has to be step one. You need to look online, talk to friends and fellow entrepreneurs, and go in and grab the small business support brochures from the main banks in your area. The questions you are looking to be answered are what are the typical or average banking fees, types of accounts available, credit cards and lines of credits, interest rates, available small business loans etc. Then you can make an appointment with a bank manager to discuss your needs. Arm yourself with the knowledge of the fair market value of products and services, what the competitors are offering, and if there are any special deals going on that may be of benefit to you or your business.
2 - Establish a relationship. You may be a fan of random choice, but I am not. You usually do not have to settle for just any bank manager, especially at the larger branches, so find someone you like and who will listen to your needs. If you have no choice because that bank has one small business bank manager only, and you really want to bank there, then establish rapport with your assigned account manager. Smile, shake hands, get a card, chit-chat and invest in the relationship. You might be surprised how far a little charisma gets you around fees. This advice is good for your personal banking needs as well as your business. It pays to get along with your bank manager.
3 – Ask questions. Remember that this is your money and therefore your decision. Do not passively let the bank put you into an account that has higher fees for services that you will not be using. I do not blame them for trying to maximize the fees they will get. It's a game that we play. They want more fees, and we want less. However we have the choice to look around if we feel we are not being respected. Also ensure you do not get a high interest rate credit card or loan when there are lower ones available, unless you want or need it because of added flexibility, travel insurance or other rewards. Make an informed decision by asking questions instead of just accepting the first account or investment holdings the bank suggests. Be polite at all times, but ask questions. Only pay the fees you have to and find out how to minimize them in the future if possible. Do not be rushed.
4 – Talk about the future. You may just be going in there today to set up a simple savings account or small business chequing account, but talk about your future plans for a mortgage, retirement savings, investments or a line of credit. Both you and your manager should understand that you need each other, and can have a productive, profitable future together if you are honest and upfront at the beginning. Also the longer you have an established relationship with your bank and bank manager, the more flexible they can be with things like fees, assuming your account is in good standing. Remember even as you are setting up some business banking needs, you can discuss your potential personal and family banking needs in the same visit. They would love for you to have even more accounts and investments with them! This gives you leverage and should make them perk up and pay attention to you.
5 – Communicate confidence and success. It's amazing how many people show up to a first meeting with a bank manager to ask for credit in shorts, sandals and a T-shirt. I personally know that one of the benefits of being an entrepreneur is the choice of losing the tie, but please remember this is a very important meeting. You want to impress the manager, or at least encourage them to have confidence in you as a business person. Please dress nicely, sit properly without slouching in their chair, speak clearly and confidently about your goals, business plan and needs, and no matter how much money your business has or is lacking, be positive about the future. Show them pre-sale orders or invoices for large amounts, if you feel it will help offset a smaller cash flow image. Solid financial projections would come in very handy at this time. But ultimately you are selling yourself, and we all know that financial situations change frequently over time. Make them trust you and believe in you as you are the principle reason they will invest in your business, or not.
6 – Lastly, do not wait for a rainy day or a crisis to hit to ask for credit. When you have money and a good credit rating, that is the time to get a loan, line of credit or better credit card. Be disciplined with its use, but the fact is it’s much easier to get money when you have it than when you do not. Having the extra room on your card or line of credit will help tie you over during downtime of your business, especially if its seasonal.
There are some simple but important tips to get off on the right foot with your new bank and bank manager. Be prepared, be professional, and be believable. Get them to invest in your success, and then be successful!