Recipe to Strengthen Banking Relationship
Maintaining a healthy relationship with Banks/lenders reflects well on the credit track record of the Company and plays an important role to be considered for any form of a request from them.
Banks/Lenders give a significant weightage to their existing relationship with companies as well as feedback from their fellow lenders and other parties while forming a view on their relationship.
The following go a long way in strengthening relationships with Banks/lenders:
1. Timely Sharing information:
The timely sharing of information enables Banks to update their views on their credit exposure. It also ensures that the partnership with Bank/lender is transparent.
2. Encourage periodic meetings with Banks:
Meetings with Banks should be encouraged on a regular basis. Such meetings provide an informal setting to discuss any open points. These meetings should be held separately at all levels i.e., senior management, middle level as well as at operational level.
3. Routing revenue on a regular basis:
Banks would like to see the routing of a fair share of revenue thru their counters, which is also an indication to evidence of the business volume and activity of the company.
4. Forthcoming with reasons for the dip in performance:
Companies should be forthcoming in providing the reasons for the dip in performance, steps taken by them to improve upon the situation, and the timeline to revert to projected performance.
5. Plant visit/ visits to warehouses/ retail outlets:
Visits to manufacturing plants/ warehouses/ retail outlets should be organised for Banks so that they get a first-hand view of the business activity. Such visits also provide Bankers with an opportunity to interact with sales/ manufacturing staff, which is a confidence-building event.
6. Strengthened management team:
A weak management team is one of the prime causes of failure/ default situation. A strengthened management team provides confidence to the Banks. Banks should be updated with the changes in the senior management.
7. Pre-empt any delay in debt servicing & inform Banks:
Companies are well placed to pre-empt any delay in debt servicing; such events are to be prior informed to Banks with a tentative date of regularisation.
8. Sharing business plan:
Sharing business plan for the coming few years encourages banks to give their views on the funding requirement of the company as per business plans. Such an approach prepares the banks to consider enhancing the exposure.
9. Meeting all Conditions Subsequent:
Usually, a Bank prescribes a few conditions that are to be met subsequent to the drawdown; meeting these conditions and other annual periodic conditions are important to maintain a good track record with the Banks.
10. Distributing fair share of other business:
Companies should try to distribute a fair share of their other business viz. treasury, cash management, trade, etc. across Banks. This helps Banks to improve their yield on the banking relationship and in turn, facilitates them to price their product offering to companies competitively.
11. Shareholder Support:
Shareholders should demonstrate continuous support and involvement in the company, which could be in the form of an infusion of capital (if required), management support, etc.; these steps are well considered by the lender’s banks.