With alternative lenders now looking more like revolving doors than viable financing options, it’s a good time to keep your bankers happy. Commercial banks continue to be the mainstay of lending to our industry, despite the intermittent splashes by other types of capital.
If you want the absolute lowest lending rates, it pays to play the “Keep Your Banker Happy” game. Here are the rules if you want to play the game:
Keep your banker abreast of industry trends. Your banker is charged with understanding industry risk. Unfortunately, the press likes to sensationalize negatives—supply problems, bankruptcies, etc. Even though our industry is healthy and growing, if your banker reads news media, he may not get that impression. Combat this negativity by regularly mailing and faxing him positive, accurate industry data as you come across it.
Keep your banker knowledgeable about your company. Educate bankers about per-gallon profit and expense analysis. Share volume data. Keep them apprised of major new accounts, new sites, etc. If there is ever bad news about your company, they should learn it from you immediately (never through the grapevine).
Be timely with all data. If your covenants call for financial statements, agings or other regular documentation, get them to your banker before their due date.
Go to lunch and pick up the tab! Most bankers can name on one hand the execs that have bought them lunch. It’s a small gesture, but one they don’t forget. We’re always in the “gimme” mode and forget that good personal relationships, even with bankers, must strive for balanced give and take.
Give them referrals. Your banker is just like you — looking for new customers. If you hear someone grumbling about their existing financing or talking about doing a new project, let your banker know so they can call on the prospect.
Remember bankers are paid to think “worst case.” Any time you need new money, try to think like your banker, considering all the risks and the ways you will minimize them. Because you as a business owner or executive are by definition a risk-taker, and your banker by definition is risk-averse, one of you must move off your paradigm (and it won’t be your banker!). When you give bankers projections—be ultra conservative. When you say how you’re going to pay back a new loan, show them at least two alternative ways you could pay the loan if your first source of repayment went dry. Three sources of repayment seems to be a magic banker number.
Understand your bank’s process and politics. The more you understand your banker’s challenges, and help him overcome them, the easier borrowing money will become!