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The importance of building strong financier relationships

Date: 09/09/2022

With funding and cash-flow holding the key to success for many businesses, the imperative of forging trusted connections with bankers and investors cannot be understated.

Most business owners realise that relationships are crucial to their success, whether it is with customers, suppliers, accountants, lawyers and landlords.

One critical connection can sometimes be ignored or taken for granted, however, and this oversight could be costly. That is, the relationship with your financiers.

Having sufficient funding and cash-flow can make or break a business. So, establishing a good rapport with bankers and investors gives you the capacity to gain reliable access to business finance solutions and available working capital. Without that security, the long-term stability and growth of your business can be jeopardised.

Sometimes that relationship will be fostered through direct ties with bankers who you may have dealt with over many years, or the connection could come via the recommendation of your accountant of financial advisor. Either way, nurture and protect it.

Insist on trust and understanding

If your business suddenly experiences cash-flow trouble, or needs urgent funding for a project, it helps if your financier knows you and understands your business. That means you should try to get to know your financier early in your business’s life cycle – before you need their help.

Having a history with a bank, for instance, establishes mutual trust and helps the lender appreciate your capital needs. This trust factor includes keeping them across any progress and developments with the business, for better or worse.

Of course, your banker does not have to be your best friend, but it helps to have some form of personal rapport with them. You should feel comfortable approaching them when you need someone to turn to for advice.

The past couple of years has driven home the importance of forging such connections. With many businesses having hit sudden and unexpected cash-flow and financing issues as a result of COVID-19, some have been left feeling as though they are just a number in a queue with their bank. By contrast, those businesses with strong to lenders have tended to fare much better.

Seek recommendations

Given the importance of aligning with the right financial institution or investor, it is logical for business owners to take advantage of their accounting or wealth management adviser’s knowledge when it comes to financiers.

After all, they have often built relationships with myriad financial institutions over many years and they can recommend a funding partner that best suits your business and which shares similar values. They can also provide invaluable insights on the history of the business and its financial performance.

With specific funding requests, your accounting partner may play a role in developing presentations that have real financial rigour and put your business in the best possible light.

Be inclusive

If a financier is brought inside your ‘tent’ – as opposed to being ignored or left on the outer – they will often have a vested interest in your success and feel more obliged to assist with your business and financial goals.

That’s human nature, whereas if they are treated as a mere third-party service provider, you cannot expect any special funding assistance that could potentially rescue your enterprise or take it to the next level.

In effect, you want your bank’s business development manager to be a champion for your business who sells your vision – and any requirements for capital – to those people back at the bank who actually approve any financing requests.

Being proactive in this way and involving them in your business journey will often give the financier the comfort they need that their funds will be deployed appropriately and that they will get the returns they require.

Communicate and connect

There are simple, but proven, ways to strengthen ties with financiers.

First, report regularly – banks don’t like to be kept in the dark, so provide regular financial updates on the business in tandem with your accountant. Second, be honest. Inflating the success of your business, or lying about debt or tax liabilities, is a sure way to erode trust.  Third, seek their advice. A financier will be flattered to be asked about their opinions and knowledge – and their suggestions can lead to positive outcomes that you had not previously considered.

So, in summary, focus on building relationships with your financiers, bring them inside your tent, and take them on your business and financial journey.

At a time when businesses are having to jump through more regulatory hoops to get funding approved, these actions can make a difference – and put your business on the path to financial success.

Missing out on funding because of poor relationships with financiers can derail a business. So, click here to connect with a leading accounting and wealth management firm that can connect you with trusted financial institutions and investors.