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Brian's
Introduction
By
Brian Walsh (Founder & CEO of
Entrepreneur.co.za)
All businesses should hold and operate a bank
account. Banks have a vital role to play in
entrepreneurs’ lives; however, I come across
entrepreneurs daily who complain about banks…
some will actually go so far as to say they hate
banks!
The challenge is that we seldom know how to
manage our relationship with banks. We expect
more than they are prepared to deliver, and
often think they are the first port of call when
we need money. Let’s look at what you should
know about banks and how you relate to them.
1) Banks
are in the business of making money
– over and above anything else, banks are
businesses working for their stakeholders’ back
pockets. They have millions of clients and
follow strict processes including how they view
you. Don’t assume they will treat you on
personal merit. You are merely a number, and
they will treat you according to predetermined
‘rules’ that ensure they make money.
2) You
have to give in order to receive
– bank managers aren’t psychic – you need to
provide them with relevant information on a
regular basis to get their effective assistance.
We always think they should just jump when we
need help, but we often neglect them by not
submitting financials and regular projections.
Make an effort before you criticise them.
3) Entrepreneurs
are higher credit risks
– as a young or start-up entrepreneur, you
represent a higher credit risk than if you were
employed. This is the system, so don’t blame the
manager. The fact is simply that statistics
within the banking and general world clearly
highlight the fact that you are more likely to
default on payments as a new entrepreneur than
as an employee.
4) Money
speaks
– make sure there is regular activity in your
accounts. Nothing is more important to a bank
manager than seeing regular income going through
your accounts, as well as regular payments. This
proves you are making money and trading
regularly so if you need assistance, they are
more willing to oblige than if there is minimal
or no activity in your accounts.
5) Default
at your peril
– defaulting on a debit order or even worse,
writing a cheque that bounces, is a serious
issue. If it happens occasionally and the
amounts are not large, it’s not too serious.
However, regular defaults will mean that you
won’t be able to get assistance in the form of
an overdraft or loan for six months (the general
time a default is marked negatively on your
profile). Regular defaulting could also lead to
the bank withdrawing certain credit facilities
and/or calling loans. This is not a good
position to be in, so avoid it at all costs.
If you cannot help but default however, explain
to the bank in great detail how and why this
default occurred, and what you intend to do to
rectify the situation.
In summary, a relationship with a bank is
exactly that – a relationship. It requires input
from both parties and constant maintenance
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