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April 18, 2016 How To

How To: Work with your commercial lender to grow your business

By David M. Eldridge

Spring brings growth and new activity. In the commercial lending world, it's also when small- and mid-size businesses get serious about launching, growing or expanding. We celebrate national Small Business Month throughout May, which is a great time to honor the impact small businesses are making throughout Maine. With growth on our minds, businesses can benefit from learning to work with a banker to support that growth. It is said that longevity in business is based upon ensuring relationships with a good attorney, CPA, insurance agent and banker. Here are five ways to work with your banker as you grow your business:

1. Contacts

A connected commercial lender knows many people in a variety of geographical regions and industries. These include financial service professionals as well as other business owners who might provide complementary services. Whether you want to strike up relationships with important centers of influence or you are considering expanding into a different market, ask your lender to put you in contact with the people most qualified to offer vital assistance or services.

2. Portfolio Management

Part of being a good business owner includes placing your business in the best possible position to deal with inevitable change. Every business is at some stage within its own business cycle. Understanding where yours resides dictates how you should structure existing and future debts. Sometimes it is most important to maximize cash flow whereas, in other instances, debt reduction should be the focus. A collaborative lender will take the time to help you best position your business for whatever the future may hold.

3. Knowledge

An experienced commercial lender has resources. He or she may possess experience in different industries or knowledge of programs that can help you expand your business. Lenders know where to refer small business owners for assistance in preparing business plans or finding a respected firm to prepare a feasibility study. He or she will also know when a financial intermediary like FAME, SBA, Rural Development or a more localized source is needed. Sometimes, a business owner considering an expansion might hesitate based upon the common notion that 25% down is required for an acquisition. The business owner may possess the resources for this contribution, but at the cost of depleting reserves to inadequate levels. An informed lender may be able to find other financing resources to bridge the gap and leave emergency funds intact.

4. Communication

One mistake some small business owners make is to not keep their commercial lender informed. If there is a material change taking place within your organization, your lender should be one of the first to know. It is increasingly difficult for lenders to assist with adverse circumstances the longer that they persist without his/her knowledge. A concerned lender may be able to help you through difficult circumstances before they snowball into a major problem. Additionally, the best growth opportunities are ones that require immediate action. In business, timing is everything and a few days lost in bringing a lender up to speed can be the difference between celebrating a golden opportunity and bemoaning the one that got away.

5. Partnership

A successful business is about relationships. Your banker has a vested interest in your success and is oftentimes one of your biggest fans. When things are tough or your business is making a leap of faith, you want a trusted advisor standing next to you. If you have based your banking relationships upon who can save you that extra percentage in pricing, you may or may not be able to count on the next lender when you need his or her assistance most. A good business owner should aspire to create mutually beneficial relationships — with customers, vendors, service providers or even bankers. A good commercial lender will endeavor to treat you fairly. If you reciprocate, everybody wins.

David M. Eldridge, who manages the commercial lending division at Androscoggin Bank, can be reached at DEldridge@androscogginbank.com

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