How to Make Your Loan Officer Love You
Keeping a good relationship with your loan officer is the primary way to help them understand your business. Good relationships don’t necessarily mean lunches, gifts, or sporting events, but rather using the currency of information.
Keep in mind that a business loan is not a one-time transaction. As much as you need to be prepared for the very first loan interview, your continued relationship with your lender is as critical to ensure all your financing needs are uncovered in time, not when your business is in financial distress.
Javier Marin, a certified business consultant for the Florida SBDC at USF with more than 20 years of banking experience, said, “The most successful business owners are those who had their hand on the pulse of their company and kept the banker informed.”
The answer to the question ‘How is business?’ should never be limited to one word or even one sentence. ‘Fine’ neither describes your business challenges, nor your sales growth, your receivables collection rates, or your industry trends.
In fact, if your banker is good, they will ask probing questions that lead to a better understanding of your company. Marin says there are two fundamental parts to the lender-business owner conversation.
1. Know how to describe your business to your banker.
Your lender may do periodic market research using tools such as First Research or IBIS World Industry forecasts to keep on top of your industry trends, and this is information you should be constantly gathering to make any adjustments to your business or marketing plan. Understanding your competition will keep you ahead of the game.
Your lender needs to know that you are on top of your business and truly understand it to the point that you can make a quick S.W.O.T. (Strengths, Weaknesses, Opportunities, and Threats) analysis of your business at any time. This should be relatively easy if you use your business plan as the “living document” that helps guide your business decisions, as it’s meant to do.
2. Demonstrate a working knowledge of finances.
Unfortunately, knowing your company and industry well is not enough. According to Marin, your banker wants to know that you have working level understanding of your business’ finances. That is not to say that you need this knowledge at the level of a financial professional, but this is ultimately your business. Your lender is taking a risk believing that your company will repay the loan, and she/he needs to understand that you will be making decisions based on sound financial and market information, not as a result of emotional impulses.
Marin adds that concepts such as cash flow, profitability ratio, and return on investment should not be foreign to a business owner. As the principal of your company you are responsible for having acquired some level of financial literacy.
Your banker may call to set up a periodic review of your business. Depending on the size and complexity of your company, there may be a need for a quarterly, semi-annual, or annual review. Remember that your banker is one of your trusted professionals along your CPA and attorney, and you are making a mistake if you keep putting off the meeting.
In addition, if you are contemplating a decision that may turn into a cash flow issue or financing need, talk to your banker before you take any action, Marin says. Regardless of the reason to meet your banker, prepare yourself to have a productive discussion about your plans, goals, needs, and finances. The better you can communicate your company’s financial health, the more your banker will love you.