Banks are lending institutions but are run by people who value bank-client relations. Find out why pursuing this “relationship goals” is a boon to your business.
Many years back, banks leaned heavily on your bottom line figures, long-term viability, credit rating, and other quantifiable measures when evaluating your small business financing application. Lending policies were rigidly structured and if you don’t fit in this four-walled structure, you won’t stand a chance.
As banking becomes modernized, banks have been emphasizing more on customer satisfaction; windows have replaced these rigid “walls” to build a larger clientele base. In line with this thrust, fostering healthier and “stickier” banking relationships between bank and client became a tool for maintaining valued clients.
While the Singapore’s SME loan lending parameters haven’t softened owing to past banking crises and firm regulation by MAS, non-quantifiable considerations have also influenced the way banks evaluate client proposals for new loans, renewals, and adjustments in loan provisions. Although fundamental credit assessment model such as the 5Cs of credit is still applied, bank-client relationships have a more significant place in business lending today.
Do you have existing loans with banks but haven’t thought of developing a good relationship with your banker? Do you sometimes wonder why another borrower got a credit line extension or an interest rate reduction and you haven’t? It’s possible that the other borrower has invested time and effort in fostering good relations with lenders.
Here are three reasons why you should start developing friendly ties with your bankers and reap the benefits.
Fosters lender understanding of your business’ intricacies
It is not enough that creditors know your business. You should also help them do their job better to understand your industry nature and your business as well. Knowing is superficial but understanding is deeper and involves mastery.
But how will your bankers understand how distinct your business is from all the rest? If you have invested years building a good relationship with your financier, he would’ve by now developed a keen appreciation of your business.
Just by communicating with you on a regular basis about your credit requirements and your business, he’ll have formed a mental picture of how your business operates and personal attributes that have helped you successfully grow your business. He’ll know the challenges that had confronted your business and how you plan to navigate them.
Moreover, when you share your plans, your banker will know your growth aspirations and the steps you’re taking to achieve that expansion.
If your bank knows a great deal about your business, including details that matter but aren’t normally indicated in your client records, he’ll be making better and more informed decisions when it comes to packaging a new loan for you. Moreover, he’ll remember your “plus points” when evaluating your proposal.
Opens doors to better loan deals and special arrangements
Now let’s assume you were granted a one year credit line and in a few weeks’ time, the line is about to expire. You have asked for a renewal and are waiting for the bank’s feedback.
Alongside your application, there are also other clients requesting for credit line renewal and are also waiting to be assessed. When you’ve proven your creditworthiness during the past with prompt and timely repayments, your chances of getting a renewal can be big, but the same goes with the other borrowers.
If you have maintained a very good relationship with the same banker and that he knows your business too well versus other applicants, you stand a better chance of getting approved immediately and possibly, with better terms. Your banker might also help and offer to top up your existing loans.
This “relationship” with your lender can help you in times when you need some special arrangements allowed by banks on a case to case basis. For example, if you have a pressing need for a temporary credit limit increase to fund urgent purchases, the bank may make some arrangements that could facilitate increase of your credit limit so you can draw from it just in time to fund that urgent need.
If you have been a good borrower and have a pending request for an increase in your credit line, your bank relationship officer could recommend approval right away because he trusts you. The recommendation of a company’s bank relationship officer definitely helps during credit evaluation.
When you’ve maintained a good relationship with your bank and its loan officers, they could grant you special considerations that are beneficial to the both of you.
Access sound advice, information and networking opportunities
The role of a banker isn’t limited to a mere funder. A loan officer can also give you expert advice, just like your tax adviser or accountant.
If you and your loan officer have maintained a good relationship, you’re able to approach him for advice about how to manage your loan and how to use it optimally.
As an expert in loans management and optimization, he won’t hesitate to give you his two cents worth. These are valuable insights from a professional who knows your business well. You won’t have access to these anytime if you haven’t fostered a good relationship with your lender.
Moreover, you become more comfortable disclosing certain financial issues your business could be facing at the moment. This is because you trust your loan officer to hear you out and offer advice without forming biases against you.
Along with this advice, he might exceptionally help you out by recommending to credit approvers extension of facilities due date by a few more days allowing you more elbow room to address collection issues (if any) from your client’s end.
If you maintain a healthy relationship with your lending officer, your level of communication is more in depth. More info is shared between you and the lender. He knows all about your business and you too have a wealth of knowledge about bank lending policies. This knowledge will be handy when you next apply for financing as you’ll know what the information banks look out for in documents such as your bank statements.
You also get updated with the latest bank products and promos ahead of the others. This gives you some lead time to assess these new products and how they’ll help your business.
A business banker will naturally have contacts with many business owners in varied industries. He may also introduce you to some of his other clients whom could be a good fit as partners for your business be it potential suppliers or customers. In the process, you develop more contacts and build networks that could help further your business.
A good relationship between you and your banker certainly bring benefits to your business. It’s a single, non-quantifiable essential but offers multiple benefits in the long term.