Close Button
Newsletter Button

Sign up for our newsletter

The latest from Inc. Southeast Asia delivered to your inbox.

By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.

Does Your Banker Have Your Back?

5 proactive steps for protecting your small business financial needs

Share on
BY Entrepreneurs Organization - 06 Dec 2017

PHOTO CREDIT: Getty Images

Joe Fuld is an Entrepreneurs' Organization (EO) member in Washington, D.C. and President of The Campaign Workshop, a political and advocacy advertising agency that provides strategy, digital advertising, content and direct mail services to non-profit and political clients. Joe recently changed banks unexpectedly; we asked him about the circumstances around that process. Here's what he shared:

It takes money to make money. As an entrepreneur, a line of credit is a life-or-death priority that enables us to leverage opportunities and successfully navigate emergencies. I thought I had the right banker for my needs and an airtight line of credit; I was content with my five-year banking relationshipuntil suddenly, I wasn't.

Last January I was feeling quite confident about my political and advocacy advertising business, with gross and net profits at an all-time high. So, it took me by surprise when my bank of five years called, asking for a ton of information in order to renew my line of credit. I hadn't anticipated this roadblock.

Months earlier, my former banker left the bank with little explanation, and the bank itself left me hanging with very poor follow-up. It took four months and several attempts to contact my "replacement banker," who finally returned my calls when he needed paperwork to review my line of credit. I tried to connect and educate him about my business model, but soon realized we were not a good fit. He was asking questions that he should have been able to answer, and he wanted a business plan, which I had never shown them in the past. My business was producing good numbers, but he didn't understand it and didn't seem interested in learning.

I had to make a changefast. I tapped my EO Forum contacts, who shared that good numbers had little to do with a bank increasing or decreasing a line of credit. This seemed counterintuitiveif I was approved based on numbers inferior to those that I had now, wouldn't the bank love it when my numbers got better? The short answer: No. The longer answer: Some banks make decisions based on a cryptic "market-driven" process that has nothing to do with how you got funding in the past.

I went to my network to find a new banker. To make my decision, I asked three questions of my Then-Banker and my Prospective Banker. Their answers were very different:

  • What kind of loans do you offer?

My then-banker worked mainly in the government contracting space. Not only was this not my industry, but the metrics used to evaluate an advertising agency versus a government contracting business are as different as night and day. My prospective banker had a very different approach. She worked with all kinds of businesses, including advertising, real estate firms and restaurants. The bottom line was that she worked with entrepreneurs, while my then-banker focused on contractors.

  • How do you decide whether to give a small business a line of credit?

My then-banker gave a murky response. My prospective banker offered a crystal-clear method.

What is your timeline?

My then-banker had an undefined process and timeline for loans, while my prospective banker outlined coherent, fast timelines.

In the end, I switched banks so that my prospective banker became my new banker. I scored an increase in my credit line and a truly attentive team. I couldn't be happier with how the situation turned out, but if I hadn't been mindful about my small business banking needs and an emergency had cropped up, I could've found myself in a very difficult situation.

So, what would I do differently?

1. Be proactive.

It was my busy season when my former banker left, but I should have been more assertive in solidifying a new banking relationship sooner.

2. Recognize the signs.

In hindsight, it's obvious that my former bank's priorities had changedI was no longer a priority. Even before my former banker left, every credit line review was a hassle, but he understood my business, knew how to navigate the bank, and advocated for me. Without his help, I wasn't able to keep growing with that bank.

3. Have more funding than you need.

It is tough to get funding from a bank when you're in a time crunch. I was fortunate that my numbers were good, but I had to constantly and proactively make the case for my business to ensure access to funding for growth or emergencies.

4. Formalize a business plan.

I had all of the elements of a business plan: budgets, comps, good financials, accounts receivable, a detailed pipeline and evaluation metrics. However, these separate items weren't unified in a written plan. Formalizing a business plan was very helpful for both the short- and long-term.

5. Cultivate a network.

One of the biggest lessons I learned from this process is the importance of having a network of peers who share their experience. My business groups played critical roles in reviewing my business plan, providing great feedback and helping me identify a banker who fits my needs.

inc-logo Join Our Newsletter!
The news all entrepreneurs need to know now.


19 Things You Can Do Today to Be Healthier and More Productive, According to Science

Read Next

Want to Sell to Whole Foods? Your Products Might Need an Amazon Makeover First

Read Next