Though we are warned about the risks of going into debt in Scripture, it can be entered into with wisdom and discernment. If you are planning to borrow money for what you believe is a smart investment, you’ll need to consult two things: the good Lord, and a good banker. After prayer and careful planning, start creating intentional relationships with lenders.
Of course, the best time to develop a good working relationship with your banker is before you need the money. Establishing a strong relationship in advance creates a favorable environment for taking out a loan and ensures you understand their unique lending criteria. Bankers can be positively influenced by proactive measures to make their jobs easier. When you provide all the information they need and help them become familiar with your business, you maximize your chances of securing a deal, maintaining a positive working relationship, and benefitting from their expertise.
Consider These Ten Tips for Developing Relationships with Lenders:
- Ask your peers for banking recommendations. Godly counsel and real firsthand experience trump marketing every time!
- Find two banks with enough scale and capability to serve as long-term partners as you grow your business.
- Get to know your banker before help is needed by inviting them to tour your business and stay up-to-date with your progress.
- Be prepared by knowing your numbers and having your financial house in order before you seek extended credit.
- Understand your short- and long-term financial needs before discussing credit issues with the bank.
- Share a solid financial performance and projections package, including two-three years of financial statements, a current/interim statement, and a pro-forma look ahead to justify your borrowing needs.
- Maintain a healthy debt-to-equity ratio (generally with debt levels no more than 2-3x equity) by reinvesting a portion of company profits and demonstrating long-term commitment to funding the business.
- Learn what your banker is able to do in the current economic environment.
- Track the progress of the loan approval process as loans can take two-four weeks to wind their way through the application, review, and approval processes, or even more time if property must be appraised.
- Demonstrate that you’re invested in both the future of your company and in your relationship with the bank.
Learn More about C12
Are you looking for best business practices to help you lead and grow your business? As a C12 member, you can join like-minded peers each month for a day of learning and exchanging ideas. Topics include Christian business stewardship, debt, corporate culture, servant leadership and more. If you are serious about growing a great business for a greater purpose, find a C12 Group near you.