What do Lenders Really Look at
What Does a Lender Want to Know
Don’t Tell Your Lender Everything
Due Diligence on Lenders
Every Business Has a Funding Source, Few Have a Lender
Relationship With Your Lender
The question I get most often from people is “What affects my relationship with my lender the most?”
The answer is communication. Communication or lack there of is the greatest area of weakness between entrepreneurs and their lenders. When news is bad, entrepreneurs tend to shut down communication thinking the lender will be upset. The entrepreneur needs to understand that the lender may be concerned, and their reactions will be far less negative than if they are told nothing. Just as in your personal relationship, nothing upsets your partner more than surprises. The same is true with your lender.
Don’t blame yourself totally, because not all the weaknesses in this lending relationship rest with the entrepreneur. Lenders change jobs more frequently than politicians change their minds. As a result of these jobs changes, many lenders are unfamiliar with their customers, and become wary of extending credit even when the business deserves the credit.
Relationships Are Challenging
Relationships, whether personal or business, are always challenging. But in order for the entrepreneur to survive, an environment must be created that is conducive to fostering a productive, long-lasting relationship with your lender. Clear, frequent, open lines of communication are the most necessary component of a strong entrepreneur-lender relationship. Business owners and lenders should talk at least quarterly. And, when things are changing rapidly in the business, they may need to be talking weekly.
Invite Your Banker Inside
Lenders will always require financial statements and the frequency will depend on the type of loan. However, the entrepreneur has to realize there is more involved in communication than mailing out financial statements. Invite the lender to tour you facilities, but don’t extend the invitation just before you need their money, as that will create suspicion. Communicate with your lender when something important happens, such as gaining a major account. Be sure to put your comments in writing. This provides your lender with documentation should questions arise.
And remember, a lending relationship is identical to any relationship, because it is based on trust. Therefore, a lending relationship is the same as your personal relationship, in that it needs to be nurtured day in and day out, not once a year. To learn more financial leadership skills, download the free 7 Habits of Highly Effective CFOs.
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