How a Good Banking Relationship Can Increase Your Access to Capital in Tough Times
I received an email from my bank last week implying that my PPP loan may not be forgiven because I didn’t provide proper documentation. “Are they crazy?” I thought.
I knew for sure that I submitted everything I was supposed to as outlined by the SBA: my 2019 tax return, Schedule C and other reports showing payroll cost activity for 2019. I immediately responded to the general email address the bank provided. I’ll tell you what happened next but first, let me provide a little context:
For the past few weeks, I’ve been blogging about the 10 Lessons that “Rona” Is Teaching All Business Owners, we have now covered #1-4:
#1. Have a financial expert on retainer regularly managing your numbers so you can move quickly to access financial relief (read here).
#2. In crisis, prioritize needs over wants (read here).
#3. Revenue is Vanity. Profit is Sanity. Cash flow is Reality (read here).
#4. If Cash is King, Savings is Queen! 3-6 months of emergency savings is not enough anymore (read here).
Let’s continue this series by discussing how a strong relationship with your bank can help you access capital right now:
#5. Choose a bank and a business banker that wants a relationship with you and advocates for you.
After responding to that cryptic message from my bank, I received an email from my banker followed by a call. I figured something was seriously wrong. My banker said that the bank miscalculated the PPP loan amount and I should have received more. Great news! He then went on to tell me that once the bank received messages to that general inbox, it divvies it out to business bankers to respond to customers directly.
My business banker happened to look at the list and pulled all his client names to make sure he would be the one to contact them. THAT is the true value of a business banker!
#6. Large banks are accessible but community banks are reliable.
Given this experience, trust in my financial institution’s ability to support me in my time of need has definitely increased. My primary bank is a major national bank and I’ve been largely satisfied with their service. But, I have heard disappointing stories from fellow business owners who bank at large banks.
Smaller banks and credit unions have been more proactive in waiving basic fees (late payments, overdrafts, etc) and more creative with their product offerings than larger banks. Business owners are switching to smaller banks due to lack of availability on lines of credit, long wait times/little access to banking representatives, no personalized customer assistance, etc.
That said, if you have a significant amount of cash held at one bank, it’s a good idea to diversify funds to a second smaller bank that may be more readily accessible and receptive to your needs.
#7. Not all credit is bad credit. To some it’s expensive cash, to others it’s insurance or a lifeline.
More than ever, business owners need access to capital. If profits, cash and crowd funds are not readily available, credit is the next reasonable source. If your business is still reasonably healthy, contact your business banker to sign up for a line of credit. I’ve heard that banks are tightening their purse strings but if you have a long standing relationship with a bank or business banker, they can likely advocate for you.
Many people shun credit cards, lines of credits and loans as sources of funding. CREDIT is not a bad word but it does need to be managed vigilantly. To some, credit is expensive cash, to others it’s insurance or a lifeline.
I recently spoke to a business owner that makes and packages flavored sauces. She manufactures products that are ready to place on shelves of major grocery and food store chains. I asked if she had a line of credit in case customers are slow to pay and her response was “I don’t want to owe anyone money”. I responded, you don’t have to owe anyone if you don’t draw on the line of credit. It’s just there in case of emergency.
Kudos to those business owners who were able to get a line of credit, loan or increase credit card limits during the good times! These lifelines will come in handy in a pinch.
The SBA has offered low interest loans for those businesses seriously impacted by COVID-19. There is still PPP loan funding available for those who have not yet applied. PPP loan funds are primarily to be used on payroll costs. If your business has not picked up and it doesn’t make sense to bring employees back at this time, it still makes sense to apply now. If you receive the funds and don’t use them within the 8-week covered period, it will simply turn into a 2-year loan with a 1% interest rate, the lowest rate, no collateral, no credit requirement loan we will likely see in our lifetime!
I worked on Wall Street for 10 years and understand the importance of banking systems to the stability of global financial markets.
Even so, it took a global pandemic for me to truly realize the importance of the bank/customer relationship at a local level. Small business customers are really hurting right now. The banks and bankers have a tremendous opportunity to help.
And, so do I. If you’d like to know how to access capital for banking institutions during this time, contact me here.