September 11, 2013

Our business and personal finances can be touchy subjects and are generally considered very private. Our complex relationship with money naturally leads us to avoid tough conversations and prevents us from openly addressing money issues. (Note: see the whole area of behavioral finance, which explores how humans relate uniquely and interestingly to money.)

When people or businesses meet financial trouble, they often make the mistake of hiding it from their bankers, fearing repercussions, judgment, stigma, and abuse – all words I have heard from senior execs about their banker interactions.

Candor with the right banker/lender can genuinely help. While your situation, in the moment, may feel like the most unique, complex financial situation you can imagine, chances are, they have seen much worse. And I can assure you, the good bankers have seen many situations similar to yours before and they want to help.

Acknowledging the Issue

We are just beginning the recovery from a tough recession. Whether it was personal, business or both, most felt the impact, and some are still struggling. Whether it’s work or home, big or small, if you are hiding your concerns and challenges from your bank, you may be holding back your own recovery. Being forthright with your bank gives you a greater opportunity to realize relief and recovery at a faster pace.

A Case In Point

A nonprofit was struggling to find a line of credit. Their cash flow was cyclical (based upon two annual donation drives) and they believed no one would understand this challenge, let alone work with it. After several conversations with their bank, they admitted their struggle. Their banker also knew of their sizeable real estate holdings and suggested an option to refinance a number of their properties. Their candor with their bank resulted in improved cash flow, a new line of credit, and remaining equity in some of their properties as a reserve for future credit needs.

The point is this: If you are withholding information – the good, the bad or the ugly – your banker won’t know the best way to help.

Trust and Confidence – and It’s Free!

Most importantly, your banker can – and should be – a confidant and trusted advisor. Actually, your banker is one of the few advisors you have that does not charge you to consult. If you don’t trust your current banker to be by your side as you navigate your financial future, find a new banker.