Many SMEs believe the big four banks are all the same, and therefore don’t see the point in investing time and effort in engaging with their bank and potential alternative banks.
They find dealing with banks hard work, particularly when there is constant turnover in bank staff and, as a result, they tend to fall into the default position of “let sleeping dogs lie”.
This is in fact the worst thing an SME can do because this approach is more likely to result in the bank not being there for you in your time of need.
More than two thirds of the businesses I work with thought they had a good relationship with their bank only to find in their time of need that this was not the case.
Perhaps surprisingly, many of the businesses most at risk are those that have been with the one bank since inception.
The banks hold all the power in relationships with SMEs because the bank is much more important to the SME than any one business ever is to a bank.
Nevertheless there are steps SMEs can take to optimise their position and minimise the risk of the bank not being there for them in their time of need.
Foremost, SMEs should treat the banking relationship as a risk management issue and deal with it like any other risk management issue.
This means having a plan that ensures the risk is regularly reviewed, is quantified and strategies put in place to manage the risk.
In practical terms, the steps all SMEs should take include:
Conduct a regular review of your banking relationship. The bank reviews your business all the time (try going over your overdraft limit and see what happens!) but how often do you review your bank?
And the best time to review your banking relationship is when you have no new or particular ask of the bank.
2. Build relationships
Build relationships at multiple levels within your bank. Get to know as many people in your bank as possible including senior executives.
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On average, bankers remain in a role for less than two years, so you need multiple connections at different levels.
You also must be willing to invest time and effort in “educating” new bankers about you and your business. The risks involved in giving up on this time consuming and at times frustrating task are significant.
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