Avoid These Mistakes When Dealing With Your Bank
A simple reality of running a small or medium sized enterprise in Australia is that your best bet for raising capital is through one of our banks. And that is actually great news, with the Australian banking system regarded as one of the strongest in the world.
Even better, our big banks are all very keen to promote their SME credentials with billion dollar lending pledges and innovation funds specifically for small and medium sized enterprises announced by the likes of ANZ Bank and NAB recently.
So what are some of the common mistakes that SMEs make when dealing with their banks – mistakes that you should avoid?
Dollars not Sense
Banks lend SMEs money, so its hardly a surprise that the amount lent and the interest charged on it are the main factors that people zero in on.
However, other factors like overdrafts, facility conditions, and flexibility within your limits if conditions change, can all be the difference between success and failure. This is especially so because growing SMEs often experience ‘lumpy’ revenue streams and unpredictable expenses.
Be sure to look closely at the additional conditions and work with your business banker to negotiate better outcomes.
The Silent Treatment
It may be a relic of Australia’s anti-authority culture that businesses often see banks as adversaries rather than allies, and keep them ‘out of the loop’. But the big four banks and smaller institutions have all realized that personal relationships matter to customers, especially business customers.
Whether you are seeking additional funds for expansion, or have an inkling that conditions might be about to get tough, don’t forget that business bankers have a wealth of experience to share, and are professionally incentivised to make sure that their clients continue to grow and succeed.
In a business environment where loyalty programs and getting repeat business are both crucial, it is easy to overestimate the value of a track record with a company. It’s important to remember that banks are businesses motivated by risk/reward profiles, rather than emotion.
While business bankers might be helpful, some SMEs make the mistake of being unrealistic and believing that the bank might extend that help to situations where it is not financially rewarding, because of past history or loyalty. Being realistic about your bank and what they can offer you is the first step in making rational business decisions.
For advice about financing, banking relationships or how to manage your business better, our Scott Partners team invite you to contact us – by email or phone us at 1300 365 455 to arrange an appointment. We are small and medium business specialists and can help you to put in place a plan that will serve you now and in the future.