3 Questions Every Business Owner Should Ask Their Banker
In the early days of establishing your banking relationship, there are important questions to ask your banker directly, or gather from independent resources:
1. Who will be my point of contact? Will they be available?
It is essential to have an advocate at your bank, someone you can meet with regularly, at your office and at the bank, who has the depth and breadth of experience to understand your industry and is willing to commit the time to you and your needs. The relationship should not stop there. Can/ will your banker connect you with the local business circle, which in turn opens leads to customers and other professional services?
2. What is the lending process?
Make sure that the initial stage of the process includes the opportunity for you to sit down with your banker to discuss why you believe you need financing and be ready to identify the stages of your operations, such as when cash flows in and when it is paid out, your growth plans, or equipment purchase plans.
Your banker should be able to propose options for your specific need, rather than a one-size-fits-all solution. Is your company’s size and/or the amount of your loan request within the typical range for the Bank, or will it be an extraordinary request? You will want to know if the approval decisions are made locally, and what is the anticipated timeline from application to approval.
And finally, although no less significant –
3. Is the bank’s financial condition strong and stable?
Of course, you will want to know if the bank is FDIC-insured. That should be a given. But, how well-capitalized is it? You can certainly ask, and should receive a direct answer. That information is also available to the public via Call Reports that are filed quarterly. The level of non-current loans as a percentage of total loans can also be a key indicator. You will want this to be a very low number. There are also industry ratings available, such as the Bauer’s 5-star rating system, which takes a number of these factors into account prior to assigning a rating. In this case, the higher number the better.
In the end, open communication is key to a successful banking relationship. You should feel comfortable and confident asking any question that is important to you, to know you have found the right fit for your banking needs!