Nothing sucks the enthusiasm out of an entrepreneur quicker than a bank pouring cold water on a new business idea and refusing to back it.
It’s not that banks and entrepreneurs don’t mix well, but sometimes their interests are not as closely aligned as they should be and they experience communication difficulties.
William Lee, assistant vice president, Retail Banking at Canadian Western Bank in Calgary, has seen it before and has some advice on how entrepreneurs should work with their bankers to achieve their objectives.
The first point says Mr. Lee is to accept that both personal bankers and small business bankers tend to understand the entrepreneurial spirit.
“In some cases, they’ve been entrepreneurs themselves, or work – as we do here at Canadian Western Bank – for a very entrepreneurial financial institution. We know what it’s like to have an idea and passion for a new business. Our goal is to help our customers get that business off the ground,” says Mr. Lee.
For some entrepreneurs the first challenge can be as simple as understanding the difference between a personal bank account and a business account. They may also need to develop a new relationship with a small business banker who will work in tandem with their personal banking account manager if the two accounts are with the same bank.
“A customer starting a new business may want to operate it through their personal account to keep things simple, but we discourage that,” explains Mr. Lee. “It does not work for a variety of reason to mix personal and business banking in the same account.”
While it’s clear that personal and business accounts be separated Lee says it makes good sense to have those accounts with the same bank.
“As bankers, we are far better positioned to help an entrepreneur get off the ground and thrive if we understand both their personal and business finances. For example, a start-up business may not qualify for a loan to purchase equipment and supplies and the entrepreneur may have to finance them with personal assets. We can help set up a personal line of credit and provide advice on how to make personal loans to their company and get them repaid,” he adds.
Becoming an entrepreneur is a big step for most people and it can be risky, but establishing and maintaining a good relationship with their banker should not be one of those risks.