When to Swipe Left on a Banking Partner by Brian CalifanoThe recent stress across the banking industry highlights the seriousness of choosing the right bank for your company and personal life. In our role as Fractional CFOs, we have many great relationships with bankers and relationship managers at many of the well-known financial institutions, including the ones making headlines recently. 

There are many reasons why these specific banks are enduring the stresses that they are (for a good article on what happened with Silicon Valley Bank (SVB), click here). 

Amidst all this turmoil, most of us are wondering: How can I avoid this happening to me? While nothing is foolproof, we’ve highlighted three critical considerations when entering into, or continuing, a relationship with a bank:

      1. Build a Good Relationship: Whether it’s the Paycheck Protection Program (PPP), the EIDL program or obtaining a conventional loan, a strong relationship with your banker is always an important way to learn more, and take advantage of programs offered by both the bank and federal and state governments. Like any relationship you have, the more you put into it, the more you get out of it. As Fractional CFOs, we communicate with our clients’ bankers to communicate their financial needs and seek opportunities to leverage programs. And in many cases, a good relationship banker will connect you with high-net-worth individuals who may be looking to invest in a company like yours. Whenever you bank at a large institution, it is much easier to navigate the halls when you have a personal guide helping you maximize the opportunities.
      2. Read Financial Filings: Most banks are publicly listed companies and therefore have to file their financial performance with either the Securities Exchange Commission (SEC) or with Federal Banking authorities. Even if you don’t consider yourself financially savvy nor regularly review public documents like this, it’s important to read and understand a financial institution’s risk profile. For example, SVB invested heavily in the technology industry which has been enduring a slowdown across the board. If you were a customer of the bank, yet you are not in the tech industry, you might question whether or not it was the right banking partner for you given their risk profile. 
      3. Diversify When You Can: There’s an old saying: “Don’t put all your eggs in one basket.” The same is true for your banking relationships. On the one hand, utilizing one institution for all your assets can help minimize fees, maximize potential interest rates, and help you qualify for special programs. However, on the other hand and especially in light of the current circumstances, having money at two or more institutions allows you to more easily transfer funds from one bank to another in the event the bank goes into receivership or is bailed out by the government. Although both scenarios are highly unlikely, recent events tell us that it’s important to mitigate your risk, ensuring you don’t experience your own liquidity crisis if the bank cannot provide funds in a timely manner.

Like choosing your significant other in your personal life, a banking relationship is one that is vital to both your business and personal cash flow. Not all banks are built the same. And not every bank is the perfect lender for you and your business. It is important to take the time to reflect on what a “perfect bank” is for you and where you can find the type of financial support you are seeking for your business. The current banking crisis is yet another reminder for all entrepreneurs to do their homework with every partner in their business. If you think there is an issue with your current bank, don’t be afraid to swipe left on them!

Take-away: If you are not sure if your current finance partner is the right one for you, contact Scott and Brian at info@acceleratingcfo.com to discuss what you should look for in the perfect banking relationship. 

Brian Califano & Scott MargolinBrian Califano

Scott Margolin

Co-founders & Managing Partners


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