Relationship: A state involving mutual dealings between people or parties…
In today’s financial environment, it is important to understand if you have a relationship with your bank or are you just doing business with them on their terms… Today at most banks, there are forces at work that may negatively impact your business, and may have nothing to do with how well you are running your business…
The “Too Big to Fail” have found that they no longer need to take any risk in making loans and instead make enormous profits borrowing at near zero percent from our own government and investing those same funds into risk free Treasury securities and have indiscriminately reduced lending across all segments of business. They have now become “Too Big to Serve.”
National Banks make lending decisions based on models that typically do not account for individual achievement or success, but rather on computer generated forecasts on the profitability, or unprofitability of a sector. The same banks, who offered express loans with no documentation, are the ones who shut off credit once the economic crises ensued.
Most banks have decided to raise fees on ordinary products as their balance sheets are shrinking due to less loan demand.
In response to increased regulatory pressure, some banks have reduced lending even to worthy borrowers in asset classes that may not be popular with the regulators.
So, an important question you must ask yourself is… Do you have a relationship with your bank?
Does your bank understand your entire business?
Do you have someone that you can talk to about your needs? Right now?
Do you have a banker that you can call for advice?
Is the bank you are doing business with continuing to lend in this environment or not? Is their primary business in line with yours?
Is your bank under regulatory scrutiny? And how might that affect your business needs?
Do you feel that your bank cares about your business?
It is time to step back, and ask these simple but tough questions before your business is affected… Most will wait until there is an issue, but the smart entrepreneur will be proactive, learn about the macro forces potentially affecting their business, and create the type of relationship necessary to survive and prosper.