Building a banking relationship: A foundation for success

When you’re building a home, office or any building, some of the most important construction happens where you can’t see it — underground. When quality groundwork is complete, then you can start building a strong foundation. The proper prepping of sub-surfaces and installation of utilities help stabilize the structure, provide necessary services and prevent future problems. Likewise, when you’re building, or even expanding a business, you need to establish a strong base, one that will set you up for success and support you throughout the life of your business.

One of the best places to start is to build a relationship with a trusted banker who can provide advice, guidance, helpful resources and banking products to help you meaningfully build your business for the long term.

Utah construction executive Stephanie Nix-Thomas, knows how important groundwork is. In fact, her company works meticulously to ensure that sub-surfaces, the ground and utilities, are properly developed to support the structures above. She also knows how important strong banking relationships are. When she and her brother, Jon Nix, purchased their parent’s construction business in 2002, she had questions. A banker provided the groundwork to help her gain financial confidence and build a foundation for future success.

Stephanie Nox, who is now president and CEO of Claude H. Nix Construction/Jasco Inc., recently shared her experience and advice for business owners:

“Before we purchased the business, Jon and I decided that I would be in charge of the business end of things and he would be in charge of operations. I had already spent a couple of years learning the works of the business from the field, doing a little estimating and project management, but at that time, we had a bookkeeper and my mom was still involved. When I took over the finances, I still had many questions.

“My parents had been longtime customers at Bank of Utah, so during my first Christmas season as co-owner, a bank representative visited to bring us a small gift — a box of apples — and I took that opportunity to ask him question after question. He was open to me calling him any time, so I did. I learned what the bank looks for in financials and for loan approvals. He showed me ratios to watch and gave me sound advice, no matter the question. He really was my first business advisor.

“Establishing an early relationship with your financial institution is important, but maintaining that relationship is just as critical, in terms of finances and just general guidance. Any time I need help, I know I can count on the bank. My advice to all business owners is to make an appointment with your financial institution and get to know your bankers and lenders. And don’t forget to ask questions — a lot of them. The more financial knowledge you have, the more confidence you have when making business decisions.”

As Stephanie said, establishing a meaningful relationship with a bank can give you valuable insight into financial tools and processes, and help you gain the confidence you need to move your business forward. Here are four reasons to build that relationship early and maintain thoughtful contact:

1. A banker can show business owners how the lending process works, how lending decisions are made and what the federal regulations are. Understanding the rules can help business owners see themselves and their businesses from the bank’s perspective and can be advantageous as they’re refining business plans and looking toward the future.

For example, it’s important for entrepreneurs to know that banks are heavily regulated by the government, which is why they seem rigid in their lending decisions at times. Banks must be very careful in choosing companies and individuals that are a good risk, meaning they’ll provide a good return on investment.

There are no easy answers to how one might obtain capital for a new business, but if business owners have a relationship with a bank, a relationship manager can point them to a variety of resources.

2. A banker can assist with financial tasks beyond financing. From setting up deposit accounts, to managing cash flow, to providing payroll and payment systems, banks can help business owners with banking products to manage and maximize their finances.

3. A banker can provide friendly, honest advice that is relevant, objective and constructive. They can help business owners look at their professional and personal goals and develop a plan for achieving those goals. They may ask challenging questions that, while difficult to answer, will help business owners refine their plans, determine the best approach for their businesses and maybe even rethink their financial habits.

4. And last, but not least, a banker may also note red flags.

For example, if a business owner has excessive credit card use, a banker will remind her or him that credit card debt can be expensive and can harm credit when not paid as agreed. A banker can even suggest other funding avenues, such as grants. On that note, businesses owners should never be reluctant to discuss challenges with their bankers, who can direct them to available resources either in the bank or the community. Be proactive; making the bank aware of problems, even unpleasant news, lets them know you understand and take your obligations seriously.

Again, every business needs a dependable partner and proper groundwork on which honesty, loyalty and communication can be built. A bank can be that for you, whether you’re a new business owner or a seasoned one. Just remember to always ask questions: Never let fear or embarrassment get in the way of success.

Cari Fullerton is executive vice president and chief credit officer at Bank of Utah in Ogden.