Bank Problems for Small Business (Revisited)
Published Newsday December 25, 2000

RICHARD JOSEPH
GENERAL MANAGER,
CARIBBEAN BUSINESS SERVICES LIMITED

On page 20 of the Newsday of December 13, 2000 there is an article attributed to the Small Enterprising Business Association which complains that banks are not interested in small business development. It then further goes on to confuse the reader by describing the problems faced by an entrepreneur in starting a business, all of which were attributed to the installation of infrastructure by a public utility. At no point did the article show where the banking relationship had any negative impact on the entire exercise.

The article is a good illustration of how small businesses misunderstand banks.

First of all, regardless of the tone of their advertisements, banks are not created to help people, but to make money for their shareholders. Like any other business, they provide services for which they charge customers to cover their costs and make a profit.

Secondly, the banks do not own the money that they have in their vaults. The money belongs to other people who come and take it back from time to time. The bank has to keep this in mind when it is lending it out, and accordingly will only lend it to people who they are convinced will pay it back at an agreed time and in agreed amounts. Banks do a pretty good job at this when it is considered that though it is not unusual for borrowers not to repay loans as originally agreed, the banks always repay their depositors on demand.

Third, banks employ ordinary people who have the same limitations that we all have. Lending staff in particular have to appreciate issues relating to a wide range of business activities in which they have no first hand experience. Frequently, they may not understand issues that are not clearly explained and documented. Faced with these situations there is frequently opportunity for the delays and misunderstandings that can frustrate customer relationships.

Understanding the points set out above is not beyond the ability of the owner of a small business. If banking facilities are important to the survival of the business, the entrepreneur must be able to do what it takes to make a positive impression on the banker chosen for support.

The first priority is to develop a relationship of trust with your banker. This requires that you be completely honest and open in your dealings, and that you meet your commitments. If things will not happen as agreed you should give your banker early notice, along with advising what will be done to bring matters back on course. Your personal credibility is the most important element of your relationship with your banker, and must be sustained at all costs if the relationship is to be productive.

The second element is to always supply extensive supporting information for any request made. Remember that the banker does not understand your business as well as you do and should not be expected to guess things that you know but have not communicated. Even if you already have a good relationship with the banker, providing this information increases your credibility, and encourages them to be more willing to provide support when faced with requests involving higher risk and uncertainty. If you have difficulty in supplying this information on your own, you should seek help from the Small Business Development Company or any other similar agency.

The third element is to understand that the banker you are dealing with has to justify his actions to people who have an even more limited knowledge of you and your business. Even with the best wishes he will be constrained by policies and guidelines which may affect his ability to provide the support that you need. Patience with delays that are beyond the control of your banker will strengthen the relationship and motivate your banker to go the extra mile to get what you want.

With care and attention, it is possible to build a relationship with your banker that will support the profitability of your enterprise in the future.