For most individuals and small businesses, a bank is where they have their checking and savings accounts and maybe a credit card. Maybe you’ve even got a signature line based on your good credit. But for wealthy individuals and businesses, their bank should have a bigger role.
Any business needs capital. That comes in two forms: equity and debt. Equity is the owners’ money and debt is borrowed. A business can be debt-free but growth will be slow. The business has to do whatever it does, pay taxes and reinvest in the business. This takes a lot of time. If the business is able to borrow money, it can grow much more quickly and leverage the owners’ money.
But having a good relationship with your bank means more than just a place to borrow money.
A business owner needs a banker who can help them get prudent debt for the business. This usually means equipment financing or a line of credit against inventory or receivables. What a business owner needs is a banker who is their champion within the bank. The bank can also provide other services to help the business, such as cash management, company credit cards, fraud protection and other things.
A good banker is one who takes the time to get to know the business owner and the business. That is, they understand your business. A banker such as this pays attention to you and connects with you periodically. A good banker will help anticipate your needs.
A really good banker is also one of the business owner’s trusted advisers, helping with advice and guidance. I’ve been referred to clients by bankers more often than any other type of trusted adviser. Bankers often recognize financial or accounting dysfunction in what are otherwise good businesses. And they see these problems before the owner of the business does. A wise banker knows when the business needs more accounting/financial expertise brought in.
Most business owners have a circle of trusted advisers. This circle often includes their attorney, their CPA, maybe their insurance broker and others. If you have the right relationship with your banker, they will be in that circle of trusted advisors. If your banker isn’t a member of that circle of trusted advisers, maybe you should look for another bank.
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