The Difference between Your Banker and an Investor

Small business owners face a lot of obstacles on the road to success; but with planning, understanding, and patience, issues with your banker don’t have to be among them. Entrepreneurs with start-up or small businesses need to keep in mind the difference between a banker and an investor.  Owners of emerging businesses often struggle with their bankers because they ask for too much; given the speculative nature of their ventures.

Bankers always want to be certain that they will receive 100% of the money back that they lend to you.  When investors put money into a business, they know they are taking a calculated risk. There are no guarantees that they will get their money back.  Investors are willing to risk that not only will they get their initial investment back, but hopefully a whole lot more.

Banking regulations affect the conditions and restraints under which bankers can make loans.  Fraud or mismanagement of funds can bring about serious consequences for the banker who doesn’t adhere to the laws governing banking as well as the individual bank’s operating policies.  When making a loan, the most a banker can expect to get back is the capital, plus interest–paid back over time.

Often the entrepreneur is asking the banker to take an investor-like risk; but the banker can only take risks based on the potential of a loan being paid back.  Unless the banker and entrepreneur understand each other’s position, a good relationship can be difficult to develop.  Only when a business has solid assets and a steady track record is it ready for a banker.

There is no reason you can’t develop a relationship with your banker before you ask for a loan.  When making deposits, visit your bank in person. Make an introductory appointment with the branch manager of your bank.  Use this appointment to get your business on the bank’s radar screen.  Explain to the branch manager what your goals are for your business and how you anticipate growing over time.

A good relationship with a banker can be a valuable asset. After all, you don’t do business with institutions, you do business with people.  A good relationship with your banker can give you a better chance for loan approvals.  The better your banker knows you, the more trusting and secure he/she will feel in his dealings with you.  Trust takes time to develop.  When trust exists on both sides, the relationship has the potential to turn into a long-lasting and mutually-beneficial one.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

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