By Eric Brown
Mobile One Courier & Logistics
So you start a business. You go to the bank and open a business checking account and get your business license — probably your most exciting and scariest moments in your life.
As your business grows, your knowledge of dealing with the financial side of the business in many cases are limited and seeking help from the right universe of advisors such as your banker is probably the last thing on your mind.
Sure, working with a CPA or an accountant is a natural progression: we all have to pay taxes. Occasionally, issues arise out the business and you may interact with a lawyer from time to time. Bankers? When do you need to work with them?
As a business owner myself, I tried to find the path of least resistance to solve the financial issues. Good old credit cards helped me along the way. For years, I bought vehicles for my business in my personal name. Eventually, I had reached a point in my business where I had too many business assets in my name and could no longer secure any more financing.
I needed another vehicle for my business, but didn’t know where to turn. At the same time I was moving offices and needed to secure a credit line to help with cash flow for the move. Fortunately, I had a good relationship with my branch manager, and was comfortable enough with her to communicate challenges in my business. For me, this was a turning point in how I interacted with my bank. If I had known about the resources that a bank could offer my business, I would have done these things sooner.
Too often we are going through a financial maze but don’t know which way to turn.
Utilizing the offerings of my bank allowed me the breathing room to continue to grow my business. That year, I had moved to a larger facility. We grew 63 percent and the line of credit helped us float cash.
The value of a good banking relationship is continually evolving. Learning to work with a banker as a trusted advisor has helps business owners think about finance in business in a new way. But as the business grows, dealing with the challenges of cash flow on a larger scale, purchasing key large assets or just becoming a more complex operation involving the right business bank can be key to future success.
A relationship with a branch manager may suffice in the earlier stages of your business, depending on your company’s size. In hindsight, as I was approaching the $1 million mark in annual sales, that was the time when I should have engaged sooner with a business banker at my bank. Each business may be different.
The more capital intensive your business may be, utilizing financing for those long-term assets instead active cash is a better strategy. Usually when you get into lines of credit and larger commercial loans, interacting with a business banker who can bring additional resources in analysis of the overall health of your business. Getting a real pulse of where you are is vital. Are you over leveraged in debt? Is your receivable average aging 45 days and beyond?
Speaking from my own experiences, there are three reasons I believe to be common why business owners don’t engage sooner with banks with more than just a checking account.
1. Lack of understanding what resources are available from your bank
2. Fear of rejection when applying for credit
3. Fear in sharing the true picture of where your business is
After speaking with local business banker, Cecil Hobbs of TowneBank, I walked away with some good advice. He recommendations approaching your bank sooner, rather than later. and not letting your fear or lack of knowledge drive your decisions.
He also says you should also work with a bank that you can have an open dialogue with, and one that understands business, and utilize your banker as an advisor, not just for transactions.
We run our respective businesses and have become experts in our area of what we do. As we grow, we can’t be experts in everything.
Making decisions without the right information can be costly. Hobbs states, “Typically a small business owner is under served in the knowledge, information and financial side. That is critical to most small businesses and many fail because of it.” Working with a business banker that understands financials and cash flow is critical. Surround yourself with the right universe of people who can be your key advisors including your CPA and lawyer.
When it comes to dealing with financial issues in business, many business owners are not sophisticated in dealing with them.
Hobbs states, “Many business owners can’t afford to hire a CFO or financial manager, and that’s where a good banking business relationship can help.”
We have all heard about experience vs. wisdom. Experience is learning from your mistakes, and wisdom is learning from others. Having the right information and dealing with right people are vital to my business.
As I grow in my business, I have come to value that relationship and see it’s importance.
