How TO deal with your banker

Newsletter #7

I said it before and will say it again: Twitter is great.

Not for the user experience in the app, which is atrocious. Or for the quality of content you see on there, which is often questionable. But for the connections you can make on it.

Because of Twitter I got to visit a very impressive sheep + arable farm yesterday and have 3 more visits planned for tomorrow.

Sure as hell beats sitting in the office all day! 🌷

This week I want to shed some light on a “necessary evil” many farmers face.

And that is how you can deal with your banker.

I want to write about this because I’ve heard of and experienced the frustrations from both sides of the table.

I’ve spoken with farmers here in the UK that were victims of the Interest Rate Misselling scandal by the banks. And seen farms that had their overdrafts cancelled or that got the message: “we have no more appetite for your business”.

But I also sat on the bankers’ side of the table. And I know how difficult it can be to serve your clients when they are slow to reply, don’t provide all information or say one thing and then do another.

In my experience, a lot of this stems from a misunderstanding about the process and a lack of clear communication. We need more of that Dutch directness.

The process

Let’s first clear up how the banking process works.

Because there is one misconception that seems to keep coming up:

The idea that the Relationship Manager is the one who approves your loan.

It’s easy to think this as they are usually the only person you get to speak to.

But in reality, the Relationship Manager is just the ‘front’ of the process. That is why in banking we call them “the front office” or “front line”.

They are rarely involved in the analytical work. For that, they work with a Credit Analyst (my old role). A good Relationship Manager will anticipate the questions from the Credit Analyst, but can't catch everything.

And only once the Credit Analyst is happy does the proposal move up to the Risk Committee. They will do the final review and come back with their own questions.

Your Relationship Manager essentially works as a project manager that tries to get your request approved. This is an important role because in practice everyone in the bank is swamped with work and they are the ones trying to push for your deadline.

It might seem like they are against you or don’t understand your business, but in most cases, they are on your side and simply try to keep all parties happy.

How you can improve this process

All the bankers I worked with genuinely want to do right by their clients (there will always be bad apples).

And often the best way to help yourself, is to help them:

Tell your banker what THEY want to know, NOT what you want them to know.

How? Simple: ask them.

The reality is this: your bank deals with so many businesses that they can't know all the details. That’s why your complex farm gets reduced to a few "pain points".

And they will assume the worst when their Credit Analyst or Risk team doesn’t receive any information on this. This is why "appetite” for your business disappears and renewals become more difficult.

But 100 bankers could review your business and all can draw a different conclusion. Some worry a lot about the industry risk, some worry more about management quality, and some about leverage. That’s why you need to ask them.

What this could look like in practice:

• Got a lot of debt? They stress your ability to make repayments.

• Seasonal revenues? Show how you manage costs.

• Only one supplier/buyer? Update them on the relationship.

So that is my final suggestion on how to deal with your bankers. Ask them how they look at your business, and then make sure you update them monthly or quarterly on these topics.

Would you lend your money to someone if all you ever got was their annual accounts?

There are of course plenty of nuances to this. Maybe you are already on a bad footing, maybe they want you to make drastic changes, or maybe the banker doesn’t even “speak your language”.

If that’s something you worry about, I’m happy to get on a FREE call with you to answer any questions and brainstorm about the best next steps for your business.

Just reply to this email or book a call directly: https://calendly.com/joeydewit/call

That’s all for this week, hope it was useful! 🌷

Best,

Joey