You built your family business on hard work and good relationships. One of the most important relationships you can develop is with your banker (or as we call them, Relationship Manager). By making your RM part of your team, he or she can help you achieve your goals and dreams, often in ways you may not have imagined. For example:
1. Expanding your operations. Say you have outgrown your existing location and are thinking of buying commercial real estate to expand. You may not have considered a SBA loan for this purpose, because, like most people, you think SBA loans are just for small or start-up companies. Actually, SBA loans are often used for expansion by larger businesses. A knowledgeable RM might consider this option and recommend a combination of direct bank financing and SBA-backed loans, using a structure that is financially beneficial to your business. Your RM will also know about County, State or Federal agencies that may assist in the financing options for your business.
2. Maximizing your cash flow. A bank can offer much more than loans. While you might run a very tight ship, you also could have cash and receivables sitting idle in an account, even for one day. That cash can work for you by being swept nightly into an instrument that can earn interest or pay down a loan. Your RM can arrange for you to have a no-fee, cash management evaluation to uncover such opportunities that will save you money, reduce interest costs, increase interest income, all while improving efficiency.
When you’re purchasing equipment, don’t forget to consider leasing as an option for the financing. Leasing can add to your current cash flow by requiring a smaller down payment with the ability to write-off the total lease payments annually. Also, much of today’s equipment has a “technical life” and leasing allows you to turn the equipment back when the lease is finished. This allows you to then go out and get the most “updated” new equipment your company needs.
Remember your financing, whether it be a term loan or lease, should follow the term of depreciation or life of that equipment.
The key to building a relationship with your RM is good communication. Here’s how to start:
1. Designate one person at your company to work with your RM. Leaders of family-owned businesses often share responsibilities. When it comes to finances, however, it’s best to delegate that responsibility to one person, who can bring knowledge and continuity to the banking relationship.
2. Make sure your RM also knows all of the key people in your company. Family-owned businesses have many important players and roles may change as the company grows.
3. Communicate early and often. By letting your RM know how your business operates, who the players are, and any changes you plan to make, he or she can recommend financial strategies that will maximize your resources.
You’ve worked hard to build your company. A quality relationship with your RM will pay multiple dividends and help you realize an even higher rate of success for your business.
Please contact Larry Rush, SVP at National Penn, at 610.208.4981 if you have any questions or would like more information.