How to Get the Bank off Your Back

I can remember on more than one occasion observing where a client’s bank just wasn’t buying what the client was saying anymore.  Perhaps you have had a similar struggle with your bank.  There are some things you can do to avoid this issue.

Your Bank Line of Credit

My observation is that where most small businesses get in trouble with their bank is in regards to a line of credit.  There are several ways this occurs, including:

  1. Slow payment of interest due
  2. Slow in paying the line of credit down
  3. Failing to realize that purpose of a line of credit is as a bridge to cover such things as seasonality of a business
  4. Failure to ever completely pay the line of credit down, thus creating what the bank refers to as an “Evergreen Loan
  5. Failure to provide required documentation or not being timely in doing so

Obviously, the reasons cited above are not exhaustive, but they are common.  Keep in mind, when you are having difficulties with a line of credit, the bank begins to look at other loans in a different light as well.  So, what can you as a business owner do to improve your banking relationship and get the bank off your back?

Suggested Solutions

This requires some serious effort, but in the long run your business will be better for it.  So here are a few ideas to get this area under control:

  1. Develop a simple plan of how you will pay down the loan and get the line of credit to a zero principle balance at least once a year
  2. Clearly communicate that plan to the bank
  3. Apologize for past failures. That is not a sign of weakness, but rather of sincerity
  4. Explain what has been the problem and what you have done and are doing to resolve it
  5. Set a doable schedule of payments and DO WHAT YOU SAY YOU WILL DO.  Not adhering to a schedule you communicated will make it worse
  6. Be on time with interest and principle payments, even paying a little early if possible to show just how serious you are
  7. Stay in communication with the bank to avoid surprises.  If there is going to be a problem or delay, an early warning with a projected resolution date will help.

A Final Thought

If you think about it carefully, the bottom line is that this is about your integrity.  See the previous post Integrity – Success Demands It for more on this.  If you want long-term success you will need others on your side, and that includes your banker.

If you want to know more, contact us at: AimCFO – Contact

As always, your comments are welcomed.

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