A good relationship with banks is not built at the time of the annual credit review. It is built every day, through open, ongoing and transparent communication, with the aim of establishing a long-term relationship of trust. This requires a deep change in mindset: to stop seeing the bank as a counterpart to be convinced, and to start treating it as a partner to be provided with the same information used internally to manage the company.
The underlying principle is that of the mirror rule: what the company carries on its liabilities side as financing received appears on the bank’s assets side as a credit. It is therefore logical, and in the interest of both parties, that the bank has all the information necessary to assess the quality of its loan portfolio, which is closely linked to the sound management of the financed company.
This awareness comes from direct experience. Those familiar with Anglo-Saxon financial culture know the value given to transparency of information. Asking the CFO of a financed company for clarification is standard practice, and the company that provides all relevant information is rewarded in terms of access to credit. Unfortunately, this approach is not yet widespread in Mediterranean Europe: the habit of keeping information confidential, presenting "pre-packaged" documents for the occasion, and avoiding direct contact with analysts remains a significant cultural barrier.
The first story concerns a small telecommunications company that, in the 1990s, was experiencing rapid growth driven by strong demand for LAN and WAN equipment. The company had a fragile financial structure due to low equity capital, but it had a solid customer base. The problem was working capital, which absorbed a lot of liquidity due to the long payment terms requested by customers compared to those granted by American suppliers.
The solution was invoice discounting against large customers. But for this mechanism to work, the customer had to comply with two conditions stated on the invoice: 1) the contractual payment deadline and 2) the bank account to which the transfer was to be credited. Any customer who neglected these aspects was rejected by the bank.
Financial management was based on three principles: keeping track of sales colleagues' ongoing negotiations from the opening stages, carefully planning the use of credit lines to ensure the prompt repayment of loans, and providing banks with regular updates on the quality of the customer portfolio. These principles helped build the credibility needed to obtain temporary increases in credit limits when necessary. The end result? The company remained in the market long enough to become attractive to a large multinational group, which acquired ownership and retained two partners on the board of directors.
The second story concerns a medium-sized company with a sound financial structure, but room for improvement. The strategy pursued over the years has led to an important milestone: financial independence. This was achieved through self-financing to sustain ordinary operations, as well as through good remuneration of capital for shareholders. This is a decisive element for ensuring the continuity of the family business through generational transitions.
The relationship with banks was based on structured, regular communication. Submitting financial statements approved by the shareholders' meeting was merely a formality. The two annual meetings followed a fixed schedule: one in February presenting data from the previous year and one in September presenting data from the first six months of the year. The documents presented were the same as those used in regular company meetings. The first package of documents included the management income statement (with budget and historical data) and a detailed credit report on customer receivables, highlighting the categories with the best and worst payment records. The second package generated the most surprise, containing the complete financial plan and its detailed breakdown of funding and deployment by each individual bank. Each institution received a precise breakdown of how the company would be using its financial resources over the course of the year — a document that banks usually draw up internally to evaluate their clients. In this case the data matched their own perfectly.
This approach has enabled the company to gain recognition beyond the traditional three levels of banking (account manager, deputy manager and director), thereby strengthening high-level institutional relationships. The most significant achievement was obtaining a A+ o AA rating under the Basel II framework, which objectively confirms an excellent risk profile. The strength of the banking relationship has also had a positive impact beyond the company itself. For instance, when a key supplier experienced financial difficulties, the banks collaborated to maintain the supply, which was crucial for the company.
In conclusion, building a good relationship with banks is essential for all companies, whether they regularly rely on debt or are financially sound, because not all aspects of management are under your control. The framework to follow is structured around three questions.
Why are we relying on the bank? The need must be specified clearly and without fear of judgement.
How will the resources be used? It is important to outline the measures that will be taken to address any issues in line with the bank's expectations, bearing in mind the mirror rule.
In finance, every transaction has a beginning and an end, and meeting deadlines is the foundation of credibility, so the timing of actions must be precise and respected.
Writing these three points in a short report, even for routine transactions, always makes a good impression and, over time, strengthens the legacy of trust that is the true intangible asset of every well-managed company.
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