Last TweetsThe Banker’s Lament
My name is Tom Cranker, and I’m a jolly banker,
I’m a jolly banker, jolly banker am I.
I safeguard the farmers and widows and orphans,
Singin’ I’m a jolly banker, jolly banker am I.
When dust storms are sailing, and crops they are failing,
I’m a jolly banker, jolly banker am I.
I check up your shortage and bring down your mortgage,
Singin’ I’m a jolly banker, jolly banker am I.
Jolly Banker by Woody Guthrie
Banker Bashing – a new national pastime?
What’s the difference between a cattle grid and a banker? Nobody slows down to drive over a banker!
Banker bashing is not just a 21st-century pastime but has a long history. Woody Guthrie wrote his banker’s lament in the 1930s during the time of the Great Depression and the Dust Bowl of the American Prairies. These had led to the bankruptcy of many small farmers and the foreclosure on their homes and lands by unsympathetic banks. Needless to say bankers were not the flavour of the era.
Closer to home ‘merchant banker’ was popular Cockney rhyming slang implying contempt for an egotistical and self-indulgent person of limited character long before the current shenanigans of the City of London’s and Wall Street’s finest.
Up against the wall or up against the zeitgeist?
So, having established myself as one of you, a kindred spirit, a fellow member of the baying mob ready to storm the citadels of Mammon and send its occupants to the guillotine, I am going to suggest a heresy. Bankers have needs and feelings too. I don’t mean those champagne-swigging, coke-sniffing, Peppermint Rhino-frequenting public school boys from the City. Not them, obviously. Rather I mean the young lads and lasses, and let’s face it most of them are young these days, currently in charge of the business accounts of hardworking entrepreneurs like you and me. Not only do they have needs and feelings, but, I am going to go even further and suggest that you and your business have to understand them, and do everything you can (within reason!) to satisfy those needs and schmooze those feelings.
There is clearly a lot wrong with the banking system at every level, and there is no doubt that it has been harder for small businesses to get business loans since the banking apocalypse of 2008*. Several of our leading high street banks have been practically nationalised. We, the tax payers, own a large slice of them, and yet they seem no more responsive to the needs of the business community than are Barclays and HSBC who came out of the crisis without public subsidy.
*Loans for smaller businesses may become easier to obtain as The Bank of England and Treasury announced their Funding for Lending (FLS) scheme in July, making available £1.5 billion which must be leant to businesses at relatively low fixed interest rates. More about this and how to access bank finance in my next blog.
Pressure on bank managers – insights from The Secret Banker
As a significant part of my business consultancy over the past ten years has been helping small businesses obtain bank finance, it is important that I have an understanding of the pressures and constraints that the lenders work under. Recent meetings with bank managers have confirmed that the current financial climate and the banks’ role in creating it have certainly affected internal bank policy towards business clients.
One business manager from a major high street bank told me recently over coffee that he and his colleagues are under pressure to identify business clients which are profitable for the bank and weed out those that are less profitable and deemed to be high risk or high maintenance. These latter are either encouraged to move banks or are shunted on to less service-intensive packages.
Furthermore, your bank manager’s authority and discretion will have been drastically eroded over the past twenty years and most loan applications are now sent ‘upstairs’ to an anonymous group of assessors. To quote my Secret Banker source, these individuals have somewhat blinkered view of business from having “…to work in an ivory tower with no windows” and “…are extremely fit from having to climb all the stairs each day”. Security appears to be paramount, with banks expecting business owner to re-mortgage their properties; business owners with no security and poor personal credit ratings can pretty much forget any idea of securing a loan.
But we are where we are, and let’s face it no government is going to have the guts to do anything to upset the banks. What that means is that as small business owners we need to work with what we have and be strategic in our relationship with our bank.
My six-step programme for getting the best out of you banking relationship
It is quite likely that your bank is, or should be, a critical element in your business’s growth strategy. Even if your business is completely self-funding your bank is still a very important supplier of services and can also be a valuable resource. Like any business relationship, your relationship with your bank manager should be based upon a mutual understanding of each other’s needs.
Here are my six key recommendations for a healthy relationship with your bank:
- Treat the relationships as a marketing exercise: market yourself and your business as you would to a customer and make sure you present yourself and your business as professional and efficient. A key criterion when assessing a loan application will be your manager’s view of you and your team, so make sure you have done everything you can to ‘manage’ your relationship so it is favourable.
- Keep your bank well informed of your business plans and performance against plan. If you produce annual forecasts and a business plan (and you should!), then send your bank manager a copy. If you produce monthly or quarterly management accounts send these also.
- Tell your manager about your successes – new clients, awards, favourable publicity, new products etc.
- Also tell them about failures – bank managers don’t like surprises – but also tell them how you are dealing with the situation. If cash flow is tight then tell your manager and don’t go over any agreed credit limits without doing so.
- Treat you bank manager and his staff with the respect due to fellow professionals. Obvious really, but I have met business owners who seem to think it’s OK to treat their bank managers more robustly than they would other suppliers. Banks and managers make mistakes – so do businesses and entrepreneurs!
- Meet informally at least once a year – a relaxed chat about your business and their business over a coffee or at a networking event.
It’s not rocket science; you should aim to develop a relationship with you bank manager as you would with a major client or supplier. If you need help from the bank whether to expand or save your business then you want him/her to be batting for your side. A good bank manager can also be a knowledge resource and an important source of information if you need to use additional bank services to import or export for example.
Don’t think that this is my Chamberlain moment, I’m no appeaser, but within the Kafkaesque organisation that is a modern high street bank there are real human beings. It is an essential part of our role as entrepreneurs and business owners to interact with these human beings, and in doing so it makes sense for us to get the best out of this interaction.
Banking Matters
Do you need bank finance for your business?
Or are you having difficulties with you bank?
I can help you with a plan to raise finance or a strategy to improve the relationship with your bank. Contact me on 01273 275832 or email barclay@reallyclear.co.uk.
Coming Next: Shaking the Money Tree – Is Funding for Lending a new dawn for financing your business?
