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What Does Your Bank Think of You?

08.22.2013

The bank is one of the most significant business partners for an organization.The bank is one of the most significant business partners for an organization. You can’t grow a business without capital or a bank, and typically, a business needs to have a combination of both. So have you ever wondered what your bank thinks of you? Tony Caleca, member in charge of audit services at Brown Smith Wallace, discusses five questions to consider when evaluating your bank relationship.

1. How reliable are your financial statements?
Banks want to know that the information they receive can be relied upon consistently. No one likes surprises in the numbers.

2. How good are you at forecasting cash needs?
Do you call the bank when you need money or do you let them know well in advance that you need money? Organizations that provide their bank with good cash forecasting have a much greater opportunity of securing the financing they need than those that run to their banks saying, “I need this yesterday.” Businesses positioned to get financing have close relationships with their bankers. The bank understands how the business’ debt will be repaid and how those loaned funds will be used to improve the long-term financial position of the business.

3. How strong is your management team?
For most closely-held organizations, the proprietor is the most significant decision maker. Banks want to know that there’s some depth in management in the event that someone else has to make a decision. Make sure you have a solid #2 or #3 with whom your bank is comfortable.

4. How connected to your industry are you?
Are you an influencer in your industry or are you just one that exists? Banks want to know that a business is very involved—connected through associations, actively negotiating union contracts, etc. That shows banks that the business has a significant presence in the industry.

5. How did you react to the recession?
Banks are willing and able to lend when they are confident that the business borrower is truly qualified. This confidence can be gained by reviewing the history of how a business dealt with the recession and what strategies it used to reduce costs and expand products and services. Qualified businesses improved efficiencies in their organizations and did what’s necessary to improve cash flow and profitability.

For independent advice on how to improve your bank relationship, contact Tony Caleca.

For independent advice on how to improve your bank relationship, contact Tony Caleca at 314.983.1267 or tcaleca@bswllc.com.

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