Do you know how to build a successful SME-banking relationship?

Banking relationships, like almost all relationships, are two way streets. However, an SME business does have to be the more proactive partner in building the ‘appropriate’ relationship with its bank.
Depending on the size of the business and facilities needed, your bank manager (RM) will be dealing with anywhere from 40 to 150 or more SME-accounts. Therefore, it is unrealistic to expect your RM to spend the time needed to deeply understand your business (except when your account is considered to be ‘a problematic credit’, at which point you will be subject to very close monitoring that will not be by your usual manager).
Four suggestions for building a strong SME-banking relationship:
Submit a business context as part of your financial reporting. Do not just send in a set of financial statements. Regardless of whether it is monthly, quarterly or annual reporting, you should submit some commentary about the business in relation to the numbers, particularly if there are unusual/abnormal items or adverse movements (i.e. decrease in sales or profitability, losses, increased borrowings, etc.).
Facility reviews should be handled like a new application for finance. You should provide a brief business plan, as well as budgets/forecasts with clearly stated assumptions.
Meet all your obligations. This includes non-bank obligations (i.e. taxes, salaries, suppliers, etc.) and non-financial obligations (i.e. supplying reporting in a timely manner, adhering to covenants, etc.). The strongest recommendation in a credit proposal is effectively: “[the SME business] has always met its obligations as and when they fall due” or “[the owners] would not undertake any obligations that they could not fulfil”.
Avoid surprises. Banks hate surprises. Think about it, it is an unpleasant shock if one of your trade-debtors suddenly turns up and says: “I cannot pay you. I’m having some difficulties”. If you anticipate problems in meeting a loan repayment or if there is a possibility that you might go over your overdraft limit (even if only for a couple of days) talk to your bank manager before it happens.
You should be in a position to anticipate these issues if you have sound cashflow management systems in place. If you don’t, it’s time to get them in place. Needless to mention that you need to have developed action plans to rectify the issues by the time you meet your banker.

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