While every business has a bank, few have a banker. That's because bankers are too often seen as obstacles standing between an entrepreneur and the bank's vault.

"You don't do business with an institution. You do business with people. When you get a banker who believes in you, you can accomplish incredible things," counsels Debbi Fields, founder and chair of the board of Mrs. Fields Cookies.

The banker is the loan officer or office manager who handles your account. A good relationship with that person can bring you money in the form of credit, save you money in fees and enhance your business opportunities through taking advantage of the banker's extensive personal contacts.

Relations between bankers and business owners take on as many hues and shapes as relationships between husbands and wives, but the best ones all have trust and honest communication in common. "Ideally, it's a human relationship as well as a business relationship," says Bill Byrne, an entrepreneur and author of Habits of Wealth.

Why Have A Relationship?

Better access to credit is one of many benefits garnered by those with good banker relations. The biggest intangible in any loan request is the person who is asking for the money, notes Mitch Hurly, vice president and manager at First Security Bank of Utah. The more secure a banker feels about a borrower's integrity, the better the chances for loan approval. A strong, trusting relationship helps give a banker that important sense of security.

Because credit is more than just loans, good banker relationships can also result in performance bonds, letters of credit and credit lines being granted, say several business owners.

Tom Rose, co-owner of Marietta Industrial Enterprises Inc., a warehousing and transportation company in Marietta, Ohio, estimates he shaves 30 to 60 days off transactions such as getting loans or credit line extensions because of the close relationship established with his banker. When a deal's window of opportunity is narrow, a quick bank approval can make the difference between getting the deal or losing it.

Bankers can also provide introductions to potential customers, suppliers, employees and investors because of their many connections in the community. Only a strong relationship with the business owner earns such personal introductions, however.

"If bankers say nice things about us, it's a tremendous reference," emphasizes Sidney Green, president and chief executive officer of Terra Tek, an environmental services firm in Salt Lake City. He's worked with the same bank since 1970, and his employees have benefited as well when they needed services such as auto loans and home mortgages.

"My banker provides me with a lot of support and insights. I have a much higher comfort level, and that's worth a great deal to me," says Suzanne Edgar, president of Columbus, Ohio-based Epro Inc., a floor tile manufacturer, citing an important advantage of the relationship -- peace of mind.

Notes Paul Sharfin, president of M&P Construction Company Inc., in Blacklick, Ohio: "A banker is similar to your barber. You keep going to the same barber because you're comfortable with him, he takes care of you and he does a little bit extra."

Poor Relations Are Common

If banker relationships can be so beneficial, why do so many business owners suffer through poor ones, or cultivate none at all? Often, the problem is that entrepreneurs don't understand the restraints and needs of bankers. Think of capital as a food chain, suggests Raymond Smilor, vice president of the Center for Entrepreneurial Leadership, Kauffman Foundation, in Kansas City, Missouri. Early in the food chain, capital should come from private investors such as family and friends. Later, professional investors such as venture capitalists can be tapped. Only when the business has solid assets and a steady track record is it ready for a banker. Smilor says that owners of emerging businesses often struggle with their bankers because they ask for too much, given the immaturity of their companies.

Bankers, by law and temperament, are not investors. Risk and reward typically have a direct relationship -- the higher the risk, the higher the reward. Investors decide to put money into an enterprise without guarantees they will get their money back, let alone a return, because the rewards can be large if the business succeeds. However, lenders such as banks don't have the same lucrative potential. Even if the money lent is the catalyst for putting a firm on the fast track to success, the most the banker can expect to get back is the capital (plus interest) in timely payments. That is one reason why bankers and entrepreneurs so often clash. The entrepreneur asks the banker to take investor risk, while the banker's position is that he can only take credit risk because of the limited potential payoff. Until the banker and entrepreneur speak on the same wavelength, and understand each other's vantage point, a good relationship can't exist.

Communication -- or lack of -- is probably the greatest area of weakness between entrepreneurs and bankers. When the news is bad, owners tend to shut down lines of communication, thinking the banker will be upset. While the banker may understandably be concerned, his reaction will be far less negative than if he is not told what is going on. Nothing upsets a banker more than surprises.

Not all weaknesses rest with the business owner, however. Bankers change jobs more frequently than politicians stereotypically change their minds, so many may be unfamiliar with their customers and wary of extending credit even when the company is deserving.

Relationships, whether personal or business, are always challenging. But there are certain things an entrepreneur can do to help create a climate that is conducive to fostering a productive, long-lasting relationship with a banker.

Creating A Good Relationship

Clear, frequent, open lines of communication are a necessary component of a strong business owner-banker relationship. Owners and bankers should communicate at least quarterly, urges Dave Brown, senior vice president at Key Bank in Utah, who speaks to some clients every week. Bankers usually require quarterly financials, with a major review once a year. If a loan is based on inventory or accounts receivable, monthly financials may be needed.

There is more involved in communication than mailing out financials, however. Invite your banker to tour your facilities, recommends Scott Clark, author of Unleashing the Hidden Power of Your Growing Business. And, he warns, don't extend the invitation just before you ask for a loan as that will arouse suspicion.

Be sure to call your banker when something important occurs, such as gaining a major account -- or a major competitor.

Put your comments down in writing to provide ammunition in case the banker's boss questions why something happened. It's also valuable in the event your banker moves on, as the replacement can quickly become familiar with your situation if your file is complete and up-to-date.

Identical to any relationship based on trust, this one requires time. Paul D. Brawner likens it to a winning football team that relies on its running game. "A relationship is like three yards and a cloud of dust," he says about the strategy that slowly but eventually results in a touchdown. "A banking relationship needs to be nurtured day in and day out, not once a year." Brawner is senior vice president of Huntington National Bank in Columbus, Ohio, and former chair of the American Banker's Association Small Business Unit.

The adage "it's better to give than to receive" is true with a banking relationship. Don't ask for favors at the beginning. First give the bank your business and even try to bring in other accounts, which will create good will you can capitalize on later.

Don't Tell Them Everything

The banker can be a friend, ally and consultant, but not someone in whom you necessarily confide, specifically about things that don't directly affect the banker's interests. If your marriage goes on the rocks, for example, don't rush to tell your banker. And if something bad happens in your business, try to determine the cause and develop a plan for remedying the situation before talking to your banker.

No business or business owner is perfect, so it's unrealistic for a banker to want to know everything that is happening. "We all have acne in a corporate sense. The banker doesn't need to be our business confessor," Bill Byrne notes.

Finding a Banker

Pivotal to establishing a good banker relationship is finding the right banker. First, look at a bank's financials. A troubled or insolvent bank isn't going to do you much good no matter how carefully you nurture a relationship with one of its bankers. Deal with officers as high up in the organization as possible, since upper management tends not to change jobs as frequently as lower-level employees.

Many small- and medium-sized banks cater specifically to small businesses, while some larger institutions have small business divisions. These banks tend to have bankers who are tuned into small business issues, exactly the type of banker you want.

Just as you wouldn't hire the first applicant you interview for a secretarial position, why select the first banker you speak to? Interview several. Elizabeth Bradshaw, president of Ginny's Printing and Copying in Austin, Texas, says her favorite banker has "a great bedside manner." The emotional component in a relationship makes it important to find a banker with whom you are comfortable.

When you have established and nurtured a good relationship with a banker, you can count on a brighter future for your business.

What A Banker Wants To Know

To maintain a good relationship with a banker, you must demonstrate professionalism and competence, says Henry W. Gardner, vice president at Bank One in Salt Lake City, Utah. According to Gardner, when a business owner asks for a loan, this is what a banker wants to know:

* How much money do you want to borrow?
* Why do you want the money, and how will it be used?
* What is the primary source that will generate the funds to repay the loan, such as selling a building, selling inventory or increased business?
* What is the secondary source of repayment, such as liquidation of equipment, or injection of additional capital by the firm's principal?
* How will the loan be secured (collateral)?
* Who will guarantee the loan? (The owner should be taking more risk than the banker.)


The 3 Ts Of A Good Banking Relationship

Nearly everyone looking for a loan learns the "five Cs of credit," which are: character (how trustworthy you are), capacity (your financial strength), capital (the amount of your own money invested in the business), collateral (assets available to back up the loan) and conditions (the state of the economy and your industry).

Mitch Hurley, vice president and manager at First Security Bank of Utah, says that in addition to the five Cs, banking relationships are built on the "three Ts":

Talk: For a relationship to thrive, the business owner needs to talk -- communicate -- regularly with the banker. And the talk must be frank and open, even when reporting a negative development.

Time: A relationship takes time to grow. Don't rush it, and don't expect it to bear fruit immediately. Like friendships, a good banker relationship will age well over the course of its duration.

Trust: With honest, frequent communication and time, trust develops, which is "the foundation of the relationship," emphasizes Hurley. When trust exists on both sides, the relationship has the crucial component to make it a lasting one.