Six tips to help improve the relationship with your bank

1. Covenant reporting
Almost all loans are subject to covenants put in place by the bank to monitor a business’ performance regarding servicing a loan. These covenants may be financial (e.g. interest cover or enterprise value) or non-financial (e.g. regular financial reporting, maintaining appropriate levels of insurance). It is important that these covenants are both maintained and reported to the bank periodically. A business should ensure that its financial reporting has regard to these covenants and that they are reported in a timely fashion and in a format that suits the bank.

2. Ensure your bank has a good understanding of your business
Present your strategic plan to your bank and educate them about your industry, your customers and suppliers, and any risks that you foresee in your market. Your bank may be able to help you and provide valuable input where they have many clients in your industry or market.

3. Provide realistic and credible financial information
Your budgets and forecasts should be reflective of what is likely to happen in your business, rather than your ambitious or “stretch” targets. Painting an overly optimistic picture of the future of your business may lead to a loss of credibility with your bank if those targets aren’t achieved. Under-promising and over-delivering will help you build trust and your relationship with your bank.

4. Arrange regular meetings with your bank
Be proactive and offer to meet with your bank on a quarterly basis. Present your financial position and advise the bank how you are tracking against budget. Be honest and provide your bank with all information, both good and bad. Explain to your bank how you propose to deal with any adverse variances or difficulties, and where possible, seek the bank’s advice as to how they might help you. By continually providing your bank with relevant and timely information, their knowledge of your business and how you conduct yourself will strengthen.

5. Get to know your bankers
Given the large number of clients that an individual relationship banker may manage, it can be difficult to have a sole point of contact within a bank. Make sure that you build a relationship with a team within your bank. That way, if your primary banker is unavailable, or moves on to another part of the bank, you will have valuable contacts who understand your business and can help you.

6. Do what you say you are going to do
The key to building trust with your bank, and to ensure that the relationship is as strong as possible, is credibility. If you have promised something to your bank, it is very important to deliver on those promises or at least provide them with an explanation of why you haven’t and communicate a plan to remedy the situation.

Omniwealth Advisory can help you manage your relationship with your bank. We help with:

  •  Preparation of funding requests
  • Ongoing covenant and financial reporting
  • Facilitate and prepare information for presentations to banks
  • Funding mix/debt structure reviews
  • Security reviews
  • Assessment of appropriate debt levels
  • Business and personal mortgage and finance broking services
  • Investigating Accountant Reports

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We do not guarantee that the information in these articles is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

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