Understand the Benefits of a Quality Banking Relationship

Whether you’re building your business to sell one day or thinking about buying a business for the first time, you need to make sure you have a quality banking relationship established. 

Some people think of a bank as simply someplace they keep their money or where they go when they need something. In reality, banks offer much more. Unfortunately too many people often fail to take advantage of those benefits because they haven’t established a quality banking relationship. 

The Benefits of a Quality Banking Relationship

Apex Business Advisors BankingA Shared Goal

Contrary to popular belief, bankers are actually interested in your financial success. The better you do, the better they do. They want you to succeed and will do what they can to help you.

That might be sending you referrals or connecting you with strategic partners. It might be simply giving you helpful advice on a business decision.

Knowing Your Numbers

Apart from seeing basic financial statements like a P&L and Balance Sheet, bankers are used to seeing  sophisticated financial documents and using them to make strategic adjustments for profitability.

Beyond simply examining the present, they can help you forecast the future. Remember, this is something they do every day across all types of businesses. When was the last time you sat down with your banker to discuss your financial statements?

Insider Access

If you have a good relationship with your bank, and there are new products or services the bank will be offering, you might be the first to know. Keep in mind that your banker is going to be your advocate if and when you need something important. The most important measure they keep in mind in their business is trust… and that takes time to build.

Customer Service

Do you want some odd charge adjusted? Want better rates on a line of credit or on your savings account? Want a higher credit line?  All are possibilities when you have an active and regular banking relationship. Why? Because you’re more than just an account number and a balance.  

You’ll also feel more comfortable asking for help when you have an open communication line instead of just calling out of the blue or only when there’s “trouble.”

Where to start?

Start by scheduling a meeting with your banker and look to make it something regular. Ask what you can do to help them and have a list of things you need help with  They may not be able to help you with every single issue, but they may know someone who can.

If you don’t have a bank or banker you feel you can build a relationship with, give us a call. We can give you a few trusted ones we work with and you can pick one that makes the most sense for you and your business.

Choosing a Lender

SBA logoThe majority of acquisitions require some level of bank debt to facilitate the transaction and to greatly enhance returns for the buyer. In most cases, buyers want to use as much bank money as possible and utilize their own personal funds for working capital and for family needs.

Banks will generally require about a 20% down payment to consider lending on a transaction, and most banks will use the SBA guarantee program to cover the intangibles such as Goodwill. Without the SBA guarantee, banks would only be loaning on a percentage of hard assets, i.e., machinery, trucks, equipment, and real property.

Since the vast majority of businesses sell for much more than just the value of hard assets, a buyer will need to seek an SBA lender experienced in acquisition lending. There are many SBA lenders, but few who are proficient at financing business purchases.

We have witnessed buyers wasting lots of time (weeks and months) in an effort to meet with 5 or 6 banks.  Often, this results in endless promises and confusion, only to leave the buyer disappointed in the end. Loan Officers want deals, but they have to get them approved internally and most times the loan committees are more conservative and cautious than the loan officer. Apex has experience dealing with the various local and regional bankers and knowing what they are looking for in a deal. We are here to help.

To be very clear:  We do not work for the banks or get paid by the banks. Our relationship with banks involves knowing who is doing deals and assisting buyers and sellers with getting financing for a transaction. We try to find the path of least resistance because we know that time can kill deals.

Talk to your Apex Business Advisor to answer any of your questions regarding buying or selling a business.

Other Apex News:
Please join me in congratulating Apex’s Valerie Vaughn for obtaining her Certified Business Intermediary (CBI) designation!

Doug Hubler