Is there a difference between meeting with a bank and a banker?

You’d better believe it; there is a huge difference! A bank is an institution, brick and mortar; even a staid set of rules and provisions that bank employees apply to the general public. Quite different than dealing with a banker, who is a person which is capable of creating a relationship. A banker is not just a set of rules but a living breathing person; one who has the ability to cast judgement upon you in either a favorable or unfavorable manner depending upon the circumstances. Banking rules have tightened over the last several years. Today we need to operate with a set of standards that makes them want to do business with us.

In the past, before I was enlightened, I had made the mistake of telling clients that they should be bank ready at all times. In fact what I actually meant was that a business, family or an individual would benefit from always being Banker Ready. Being banker ready has several components which will be detailed below, but most importantly is the relationship is established in advance. Just as in personal/non-business relationships to be “known” means someone understands who you are and what you stand for, your character, how you do business or simply operate. Hopefully in this type of a true relationship there would even be an understanding of your hopes and dreams that you desire for your family or business.

Being banker ready allows you to expand your business or personal wealth building through the use of other people’s money. Using the leverage that banks provide has the ability to create wealth much faster than someone who works to continually save in order to invest. Therefore, one who is always banker ready has the potential to act quickly when an opportunity is presented. That doesn’t mean that I encourage acting in a hastened manner, but being prudent doesn’t mean being slow.

Here are 5 facets to being Banker Ready.

Be Organized –

Recall the idea that a banker has the human capability to cast judgement? Being organized allows you to provide accurate documentation in a timely manner. If a banker asks for documents and it takes several weeks to gather them; likely they are out of date or incomplete the banker will not believe that you are on top of your business dealings.

Proper Accounting –

There is a difference between accounting and tax returns. Proper accounting means that you have month in and month out an accurate set of books.

Including:

• Cash Flow Analysis
• Profit and Loss Statements
• Spending Plan/Budget
• Merchant Service Receipts

Proper Tax Returns –

This means that you have accurately filed returns. Depreciation schedules that are accurate, ideally with Cost Segregation Studies included. An important fact in this step is to show that you are profitable. Remember this is the proof that you will be able to repay the banker should they loan you money for your investment/business project or home.

Full Economic Value of Insurance –

Remember that a banker is grading each deal on being mutually beneficial. However, the primary concern of the banker is that they get repaid even if you were to die or become disabled. Maintaining maximum levels of life insurance and disability income replacement insurance allows the investor to collateralize a portion of the insurance to the bank which ensures the bank gets made whole, but most importantly your family also doesn’t suffer bankruptcy or additional loss in the event of death or disability. I have seen a number of deals go south, even prior to getting started, when this wasn’t in place ahead of time.

Relationship –

This means to take an intentional approach to creating a business or even personal friendship with a banker prior to needing their services. Drop in a local bank, get a referral from a colleague (best) all best when done in advance. Each year or quarter you should proactively update your records that the bank keeps on file. Provide them in advance! Include a Personal Financial Statement at a minimum along with any of the banks required documents. This will be a WOW Factor that assures you the best deal/rates when it is time to get a loan or credit line.

These are five tips that will ensure that you are ready to take action when the need arises for a good banker relationship.

Are there others that you practice? Please tweet, connect on Facebook or LinkedIn with any other ideas.