Business banker: one of three key advisers

In two previous columns, we began looking at the "three-legged-stool" -- that is, whom small businesses need as supporting advisers. The first two legs were a business-minded attorney and a CPA.

The final leg of the stool is a business banker.

Because bankers are generally not able to lend money until businesses are well established, many entrepreneurs seem to be in no hurry to establish a relationship with a specific business banker.

However, Allan Joiner, senior vice president, relationship manager commercial and industrial banking with Avenue Bank, identifies two main reasons to connect with a banker early in your venture.

"First, your banker is your advocate," Joiner said. "Having an advocate within the bank can not only demystify some of the finance world for you but will be your champion inside the bank for future requests.

"Second, a good banker will become a trusted financial adviser. Because bankers are exposed to multiple business and industries, they can be a great sounding board for ideas and help strategize on ways to reach financial objectives."

With all the Web-based resources out there, including completely online banks, a personal relationship with a business banker may seem less important.
"Developing a personal relationship with a banker can make all the difference when you have an urgent need or run into difficulty," Joiner said. "There is no substitute for the service a dedicated banker can provide who has a vested interest in you and your business."

Successfully working with a banker requires a proactive, intentional plan. There are specific steps that entrepreneurs should follow to build a strong long-term relationship with their bank.

"Developing any relationship takes mutual effort and understanding," Joiner said. "For starters, it is just as important for entrepreneurs to interview the prospective bank to make sure the fit is right as it is for the bank to evaluate the entrepreneur.

"From there, strong banking relationships are built over time through regular two-way communication and performing within mutually agreed-upon expectations. While developing a good relationship with a banker cannot prevent occasional difficulties or (ensure) that the answer to every request will be yes, a constructive relationship with the bank is infinitely more beneficial than an adversarial one for both parties."

One of the most common mistakes made by entrepreneurs is not understanding how bankers think -- and specifically how they make decisions on business loans.
"Banks are not in business to take equity risk," Joiner said. "Banking is a low-risk industry. Because we fund loans largely with depositors' dollars, banks are not in a position to extend credit without a minimum of two readily identifiable repayment sources.

"Most startup businesses will not be eligible for traditional bank financing because there is no history of cash flow and often little, if any, residual collateral to retire the debt if the business fails."

There are many other advisers who can be essential for the success of entrepreneurs. But, as my father always stressed, the foundation of any successful business is usually built on a strong relationship with your attorney, CPA and banker.

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