How to Build a Banking Relationship as a Business Owner

banking relationship

If you’re an entrepreneur or small business owner, having a good bank is key to running a successful business. From getting a loan or line of credit to getting help with invoices and tax season, it’s important to be on good terms with your bank. When it comes to business and banking, being on good terms is more than just your credit score. You need to have a banking relationship.

Why is a banking relationship beneficial for your business?

A bank can be a lifeline when times get tough for your business, but they won't want to give you a loan if they don't know you or trust you. A lot of times, that's just how banks work. Building that trust before you need them can be the difference between a rejection letter and a line of credit. Having a banking relationship is just good for business.

If you are a woman or a person of color, having a banking relationship should be prioritized. Studies show, that women and people of color are less likely to have a banking relationship. This can be severely impactful to business in difficult times. For example, up to 90% of minority and women owners impacted by covid19 were shut out of the 2020 Paycheck Protection Program.

Besides increasing the chances of getting a loan or credit, there are other benefits to building up a relationship with your bank. You may be able to negotiate lower fees or get better interest rates. As your company grows, your banker can recommend products to help you with cash flow. This is especially true if they know the details of your business and have seen how it’s grown over the years. It could also open up opportunities elsewhere. For example, your banker might have other contacts that could help your business.

Do you need a lot of money to create a banking relationship?

The short answer is no. While certain products might not be available to you unless you reach a certain threshold, there's no reason you can't have a good relationship with your banker. In fact, if you start out as a small business owner and stick with one banker as you grow, they will naturally begin to build a relationship with you and your business.

How do you establish a banking relationship?

Establishing a good relationship takes work. The same applies to a banking relationship. Here are some tips for ways you can work with your banker and establish a trusting and lasting partnership.

Network and keep in touch 

Treat your banker like you would any other potential client or business partner. Keep in touch and let them know about important milestones in your business. Try to connect with your financing officer or branch manager in person. While a lot of business can be done online these days, nothing beats a face-to-face chat. This is especially true for smaller banks. If a loan officer can put a face to a name, they are more likely to remember you and give you the help your business needs. And remember that bankers are humans too! Feel free to share personal information with them as you see fit.

Explain your business plan 

The more your banker knows about your business, the better. Try to keep them up to date on your business and where it’s headed. If a banker understands the cash flow of your company, they are more likely to recommend products that fit in better with your business. It’s also important to keep your banker informed of any changes to your business plan. If they know where you are headed, they can advise you on how to ensure your company's financial well-being.

Be honest and share information 

Honesty is key in any relationship, including with your banker. If you're having financial difficulties or are worried about future cash flow, tell your banker. Your bank is there to help you get through the good and the bad times. If they understand your particular situation, they might recommend a product or service that you hadn’t thought about. None of that is possible if you don’t keep your banker updated.

Define your goals and dreams 

If you own a business, you’re most likely already thinking of ways to make it grow. Share those dreams with your banker. Tell them how much you’d like to scale up in the coming years. Your banker can help you meet your goals. For example, if you decide to switch payment providers, your bank can help you determine which merchants are best for you. Or if you decide to go from having an online store to a store-front, your banker can help you figure out how to get a loan to make that happen.

Build a strong financial history  

When you need to ask your banker for something, it will help if your financial history shows stability. Make sure to pay your bills on time, make regular deposits, and pay off your loans in a timely manner. Banks make money from giving out loans to businesses and individuals. If you can demonstrate that your finances are strong, then you’re more likely to get the financial help you need when you ask for it.

Start building a banking relationship today

No matter where you are in your business journey, having a good banking relationship will pay off. And it’s as simple as talking to your banker and keeping them updated about your business. If you know you want to take out a loan, it’s best to start building up that relationship today. Don’t wait until you need something to get to know your banker.

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