Many small business owners have mixed feelings about their bankers. One day they are happy and the next day they are upset with them. Plus, many small business owners are unaware of how to work with bankers other than to go in and ask for money when they need it. They do not know the importance of keeping the banker in the loop on many decisions affecting the owner’s small business. Quite often the banker may be able to provide some unexpected solutions to situations being experienced by the business owner.

Since banks are in the business of lending money, bankers want to establish a relationship with the small business community in their service area. Often, small business loans make up a sizable portion of the bank’s loan portfolio. That segment of business means the local banker will take a closely held interest in any loans falling into that category, which is a good thing for the small business owner. But it falls on the business owner to establish and carry on the relationship.

Many small business owners ask how to establish or improve their relationship with their banker. The first thing is to not wait until you need financial assistance to meet with the banker but to set up meetings very early in the business's history.

The first way is to establish a credit history with the bank. A business owner should borrow small amounts of necessary money and then pay it back in a timely manner. The repayment shows the bank your business is creditworthy and a good risk. You also should establish accounts with the bank — like a checking account — and be certain to not overdraw them. There are banking products available for small businesses if you do, but don’t go into the red right off the bat with a new bank.

Most banks have a preferred size of business they support. Some like large corporations, some prefer midsize companies and others like smaller operations. Most startups are encouraged to go to local smaller banks because of the level of attention they can receive. A startup business can be time-consuming for a banker, so you need to find a fit with the business and the bank.

Become friendly with bankers by inviting them to the business and introducing them to the key employees. Don’t be nervous to talk to the banker about decisions affecting the business even if they are not related financially, because somewhere down the road that decision will be financially-related. Also be truthful with bankers. They will always be supportive but can be even more supportive when told about things when they happen instead of months later. So if the business is going to miss projections, tell the banker; if the projections are going to be exceeded, tell the banker that as well. A business’s banker wants to know the good and the bad.

The final way to improve a banking relationship is to provide adequate financial records to the banker. It is not always enough to provide balance sheets, an income statement and a cash flow analysis for the business. These requests are where a good accountant comes into play so the business owner gets the right information to the banker. A catch here is that the business owner also needs to know the financial records. Many business owners do not always understand them and allow the reports to be filed away.

So keep that banking relationship current and honest, and know that bankers are there to help. If you have other questions on building a banking relationship or other small business concerns, your area Missouri SBDC can help answer questions, offers training and one-on-one appointments; reach out to a location near you.

The Missouri SBDC is funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.