Bankers are great. They tell it like it is. But in good times and in a good economy, it is easy for small businesses to take them for granted. If you have loans out there, it is easy to forget—or worse—ignore a banker’s request.
Meeting loan covenants and requests for information during good times and bad is critically important. Make sure you can answer these questions:
- Are you filing your quarterly loan covenant requirements consistently and on a timely basis?
- Is everything organized, complete, documented, and supported to ensure a high-quality submission?
- Are any questions that are asked, for whatever reason, responded to timely, completely, and accurately?
Loans will mature and the economy will tighten. It is too late to undo past bank compliance infractions, as the notes on late, incomplete, slow responses are already noted. But building a good track record going forward can make a positive difference. Good bank relations habits include:
- Meeting all loan covenant requirements completely and on a timely basis.
- Being very responsive, consistently, on any bank requests or questions.
- Meeting all interest and principal payments like clockwork.
All crucial banking activities, new loans, credit line increases, renewal of matured loans, forbearances, loan extensions, or re-structures must be underwritten anew with credit committee approval. To ensure you remain in good standing with your banker, understand the terms of your loan documents and loan covenants. They spell out the rules, and understanding them well can prevent being in default with your loan.
Having a CFO or financial leader focused on banking for your small business is a luxury. Who wouldn’t want to have that go-to person on staff to oversee and negotiate small business bank and lender relations? Unfortunately, many small businesses are not budgeted to have a full time CFO with banking credentials. But there are alternatives, such as management and financial consultants who can step in to affordably clean up and monitor the banking needs of your business.
This is the story of you and your banker. Let’s all be proactive to secure a “happily ever after.”