Ian: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal. In this episode of the Business Coach Podcast, we’ll focus on a task of great importance to most business owners, and that’s getting what you want from your bank. Of course, you can’t always get what you want, but you can improve your chances of obtaining the credit you want, when you want it by developing a productive relationship with your banker and a good understanding of how financial institutions make lending decisions. I can’t think of a better source of such insight than Derral Moriyama. Derral is BMO’s senior Vice-President of Commercial Banking for the Greater Vancouver area and a past contributor to PROFIT Magazine and this podcast. He joins me by phone from his office in Vancouver. Derral, welcome back to the Business Coach Podcast. Derral: Thanks Ian, thank you for the invitation. Ian: So, Derral, how has the recession and the credit crunch affected small business lending practices and policy in Canada? Derral: Well Ian, I don’t think the recession and credit crunch has really affected small business lending practices to a great extent. I think some industries certainly have been hit harder by the recession than others, and I believe bankers in general are reviewing company operations to ensure businesses have a good track record, solid cash-flow, adequate capital and a reasonable outlook going forward. And I don’t think this approach really is a whole lot different than before the recession, but I believe bankers are now paying particular attention to these details. I think they want to ensure that these areas are really covered off for the benefit of the company and the bank. Ian: So really there has been an incremental change rather than a fundamental change. Derral: Absolutely. Ian: So the success of a relationship between a business and a bank is due in no small part to the individual banker involved. So what should a business owner look for in their banker? Derral: Well, if I was a business owner looking for a good banker, I would be looking for traits that show that he or she took a genuine interest in my business, was communicative and open, was there for me when I needed them and generally showed me that they were on my side and would own my problems. I would expect them to show me they valued me as a customer and they valued my business. I would also expect them to be proactive, to send me updates on the latest products or economic forecasts. You know, things that might help me in the normal course of my business. And I would be looking for advice in general. I think they could be used as a sounding board or to get a bounce on ideas as well. Ian: I like something you said in there, that they would own your problem. I guess that means you really want somebody who goes to bat for you when the chips are down. Derral: Absolutely. You want somebody on your side that is your advocate to the bank. I mean, they certainly are going to be able to tell you the risk parameters that the bank is comfortable with, but you want them to be presenting your story to the bank, when you are in time of need. Ian: So let’s talk about some of the things that the business owner can do to maintain a productive relationship with their bank, now that we’ve spoken with what you should look for in an actual banker. First, let’s talk a little bit about financial reporting. How often should you provide financials and what kind of financials are best? Derral: Well, I think the frequency of reporting would likely depend on the type of financing you are arranging. So for example, if you have a large project that the bank is providing financing for, they may ask for regular progress reports to see what’s been done or how close to budget you are. Many of our customers though, such as real estate owners or agriculture clients certainly don’t need reviewing engagement or audited statements, because values are really established through appraisals and the income is very easily verified. But other operations that are more complex may in fact require a higher level of review, which again may be beneficial to both the customer and the banker. Ian: Of course, it’s valuable for a banker to understand how your business works because that helps him or her determine your borrowing needs and your qualifications. What kinds of information above and beyond financial report should a business owner provide and how exactly should they communicate this information? Derral: I think some of this is up to the banker to initiate. So I believe your banker actually should be visiting you on a regular basis, I would say at least annually to see your operations and to get a better understanding of what you do and how you do it. And also at least annually, you should be going over your business plan with them, updating anything that has changed over the past year and what was accomplished during that year. I think it is also important to tell your banker where you see your company going in 3 to 5 years, maintaining your current position or venturing into new markets, taking over a competitor, those types of things. So your banker can actually plan with you how your banking needs might change and to stay out in front of those changes. Ian: Now Derral, over the years, I’ve spoken to numerous bankers, as well as numerous entrepreneurs who’ve told me that whenever you have trouble in your business or see trouble coming, you should let your banker know about it, sooner rather than later. Of course, a lot of business owners don’t do this because they feel that they can make the problem go away, or that if they hide it long enough it will sort of somehow creep under the radar of their bank. What reassurance or advice can you give business owners who find themselves in this situation and might feel that sharing bad news will worsen their banking relationship? Derral: From a banker’s perspective, the more time and information a banker has to deal with the problem situation, the better it is. We may be able to offer solutions to help the company through a difficult period, to restructure the banking facilities or provide advice that can just help the situation in general. I know of many situations where the customer has come to the bank early with a problem and partnered with them to solve the issue. If you truly have a bank that’s looking for a long term relationship, they understand that there will be peaks and valleys in performance and again can try to help the situation as much as possible. If you wait to tell the banker what the issue is, you may compound the problem or remove alternatives they may have. Ian: Now earlier on, you said that your banker should be someone who goes to bat for you. What if they have gone to bat for you and you still feel that a credit decision has gone against you undeservedly. What recourse do you have? Derral: Generally, there is an elevation process within each organization. I would first try to get a clear explanation from the account manager of why the decision was made. If this doesn’t satisfy you, then I would speak to the senior manager or the district executive who should be able to tell you what would be required to do the transaction. Ian: Derral, that’s great to hear that there is recourse for business owners and as always, you have given us some great advice here. Thanks for joining the Business Coach Podcast. Derral: My pleasure. Ian: Derral Moriyama is BMO Senior Vice-President of Commercial Banking for the Greater Vancouver area. That’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com/coach, profitguide.com and iTunes. For other tools to help you build your business, visit the small business resources section on BMO.com. Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.