Does your bank have your back when you need them the most?
When your business starts to change, this often results in the need for extra funding. This may also be the time when the banks will reassess your risk profile.
Your bank manager does not have access to all the information about your business that you do. When your business starts to require a bigger facility your bank manager will take a more critical look, and you may be inclined to think that your bank manager is overreacting when you need him most. But with the right approach and information you’ll find your bank manager reasonable and eager to help.
A great deal of enquiries to CFO Centre are in response to notifications by bank managers who have reacted to poor results or uncontrolled growth with increases in fees or even withdrawn facilities. To avoid this scenario, first you need to demonstrate that you are a well-rounded management team capable of creating a realistic recovery or growth plan and taking actions that are sensible and timely. Having a CFO on board, even a part time CFO, adds a lot of weight and expertise.
Aside from the plan, the bank’s highest priority is the quality of your financial reporting. Often management information is provided too late, inaccurately, or is minimalistic. This often results in the bank assuming the position to be worse than it is, and reacting accordingly.
Reporting must often be improved, and that level maintained thereafter. The bank managers need to see the evidence of the recovery to sustain their support. These requirements may be stringent and ideally should also be managed by your CFO.
In conclusion, when banks react badly to changes in your business, it is usually because they perceive an increase in risk. But taking the above steps will ensure a long, health relationship with your bank.
Article by CFO Centre.