Strategy & Operations » Leadership & Management » For better or worse

The struggle to get banks to release credit to smaller businesses continues, not least online, where FDs have been debating how best to approach their banking relationships on Financial Director’s LinkedIn group. The comments reveal anxiety but also willingness among SME FDs to push back at their banks to get what they need.

Started by Neil Morling, FD of EC Harris – and our guest columnist in this issue (see page 18) – the debate asks how FDs expected their banking relationships to develop this year. “Slowly and expensively,” Paul Russell, group FD at executive search company Antal International, told the group. “Mine have already started just like that. I can get the funding, but then they drag their heels and charge the earth.”

But those relationships remain fundamental to financing the working capital levels many businesses require. Fazal Chaudhri, CFO of global diamond trading group Exelco, told the group he had found feeding his banks more information regularly eased its concerns and had proved a good way – if time-consuming – to foster a working relationship. 

“I spend a significant amount of time communicating with them so they understand our business model, competitive strengths and corporate strategy. It is an approach that has enabled us to raise new money to finance double-digit growth for the past three years,” says Chaudhri. “In my experience, the bank relationship is like any other: you get out what you put in. It does seem, however, that in recent times you do need to put more in to get out the same.”

John Cotton, FD of Silcoms, a supplier of aerospace components, adds that he thinks recent history has proved the value of developing a good long-term relationship with your funders during the good times as well as the bad.

“My experience has been that our bank has been willing to support us during difficult times because they understand our business,” Cotton says. “With regard to long-term relationships, I think there are two key factors in developing a relationship with your bank: deliver on your promises and keep your banks fully informed about developments in your business.”

In his guest column, Morling argues that banks are more demanding than ever. “The cosy fireside chat approach to asking for money is gone and has been replaced with a more hard-headed approach,” he says. Give as good as you get, in short. 


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