Tips for Entrepreneurs: Communicating with Banks

Anyone who successfully runs a business can look forward to rising profits. As a savvy entrepreneur, you’ll invest a portion of your revenue into the company’s growth. Unfortunately, however, it is not uncommon for additional liquidity to be needed. For example, do you want to purchase a high-quality machine, or is a customer failing to pay the latest invoice as planned? If your own financial resources are insufficient, you will need to apply for a loan from your bank. Unfortunately, it is becoming increasingly common for entrepreneurs to be denied a loan. The reasons for this vary widely and cannot always be clearly defined. In this article, as tax advisors from Düsseldorf and Oberhausen, we have summarized our best tips for successful communication with banks. Those who follow these simple rules have a significantly higher chance of obtaining the loan they need.

The Problem with Loans

First, we must ask why banks are increasingly rejecting loan applications. Entrepreneurs who have been in the market for some time experienced the global economic crisis of 2008. To this day, the severe financial crisis continues to have consequences for banks. However, the issue is no longer that banks lack sufficient liquidity. Banks and savings banks are certainly capable of providing the economy with enough credit to finance the necessary investments. The specter of a potential credit crunch has therefore not loomed over the financial sector for quite some time.

And yet, despite having sufficient financial resources, banks are significantly more cautious about lending. The financial crisis led to stricter legal regulations for banks. This tighter banking regulation still influences lending today. It can be said that financial institutions have simply become more cautious. For entrepreneurs, this means that a strong balance sheet with a current business analysis alone is no longer sufficient. Your bank will always raise questions and express doubts. Those who cannot provide a satisfactory answer may have to forgo the loan.

Four Tips for Communicating with Banks

Even though the financial sector has become more cautious, entrepreneurs need not fear that this vital financial injection will be denied. The foundation for successful communication with banks is, of course, a strong balance sheet. If you have only poor financial results to show, it will be difficult even with the best advice.

We assume that your company is in good financial shape and that the balance sheet supports this. It is important that you do not rely solely on good numbers. Your bank advisor will have doubts even about the most successful companies. Competent communication is therefore extremely important for loan success.

You don’t need to be a natural communicator. If you follow our recommendations and give the matter some thought before the meeting, the conversation with your banker will hopefully go smoothly.

1. Communicate openly and regularly

Good communication with your bank should begin even before the loan meeting. As an entrepreneur, you know how important it is to maintain contact with customers and business partners. The same applies to your relationship with your bank. Regular and open contact with your bank advisor can be crucial for effective communication. The goal should be to build as personal a relationship as possible. An environment of mutual trust, transparency, and openness opens up new possibilities for you when it comes to securing a loan. It can also be helpful to hold annual balance sheet meetings with the bank.

2. Preparing for the Meeting

Once you have established a good relationship with your bank advisor, things get serious and the loan meeting draws ever closer. Nothing can replace thorough preparation for the meeting. Every entrepreneur should take the necessary time to consider which documents and information to present. To do this, you should try to put yourself in the other person’s shoes.

• What questions will the bank advisor have?
• What documents will they want to see?
• What can provide additional reassurance?

If you’ve prepared answers to these questions before the meeting, you’ll be able to respond much more calmly when they’re asked. The resulting confidence will also be noticed by your counterpart and make a good impression.

3. Convey Competence and Sustainability

At its core, the entire meeting is about the bank determining whether your company is competent and future-proof. It is therefore essential that you, as an entrepreneur, project precisely this competence and future-proofness. The following aspects will demonstrate the necessary confidence:

• Present your mission statement (vision) and business goals
• Explain your business model and strategy in an easy-to-understand way
• Develop a “financial story” to evoke emotion
• Highlight your expertise, customer and growth potential, innovative strength, and, in particular, your unique selling proposition.

So simply ask yourself what makes your company special. What are the compelling aspects of your concept? It may also be helpful to ask this question of your customers or acquaintances to gain an outside perspective with fresh insights.

4. Alternatives Provide Security

Having a Plan B makes sense in any situation. When it comes to finances, alternatives should always be available. Entrepreneurs should never rely on just one source of financing or one bank. There is no guarantee that the tips mentioned above will always lead to securing the necessary loan. So make sure to find alternatives to your primary bank early on. Maintaining contact with a second bank is the foundation of this.

In addition, companies should not rely solely on bank loans. Instead, they can also explore alternative financing options. For example, when purchasing vehicles or machinery, leasing can be a good alternative to a loan.

Questions about taxes and finances?

Entrepreneurs cannot afford to make mistakes when it comes to taxes and finances. That is why good advice is crucial for business success. At Trimborn . Partner, as your tax advisors in Düsseldorf and Oberhausen, we are the best point of contact for businesses. Our industry specialization and high level of expertise enable us to assist every company individually and professionally. We look forward to hearing from you.