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Keep a good relationship with your banker (access required)

Last week a well-regarded local economist assessed the economic landscape for a business leaders' group I facilitate. Looking ahead at the uncertainty in the Maryland economic environment, this economist wisely suggested that business owners build their lines of credit. Good idea, we all thought. Cash flow is the air supply for a business. With fluctuating revenue, margins and expenses, the ability to smooth cash flows is critical. But then the recent frustrating experiences many of my clients have had with their banks came to mind. We seem to have been whip-lashed from the era of banks lending to everyone, regardless of credit worthiness, to a time of not lending to anyone, including the most sound. Given the importance of the relationship between a business owner and her or his banker, I asked some business bankers for their side of the story. First, bankers told me that just a few years ago financial indicators like your balance sheet and cash on hand mattered. Today, the critical indicator of credit worthiness is how capable your business is of servicing debt. If you can show your banker good cash flow projections, you’re in a good position to get a loan or expand a credit line. The second theme that was repeated by every banker I spoke with was to treat your banker as an adviser to your business. Talk with your banker before going into any major financial transaction, talk through various scenarios and don’t assume you know all the options. One banker told me, “Small business owners are good at what they do, but are not always savvy with the numbers and the various tools we can use to help them solve business problems.”