In 15 years of arranging heavy equipment financing for clients in Kamloops, B.C., Hugh Sutherland has helped clients through good times and bad.
As assistant vice president and district manager for Canadian Western Bank’s Equipment Financing Group, Mr. Sutherland knows that businesses can get into financial difficulties regardless of the state of the economy – and they need to be able to work closely with their banker when that happens.
“When the economy is booming, a business can grow too quickly and run short of working capital. In bad times, as happened with British Columbia’s logging industry, demand drops, markets get squeezed, customers go broke and suddenly you are left holding a receivable that will never get paid,” he says.
Knowing how to deal with financial trouble is often crucial to a business’s survival and the first place to turn for help should be the bank, adds Mr. Sutherland.
But setting the scene to deal with your banker in bad times needs to start long before they occur.
“It’s all about relationship, trust and confidence,” says Mr. Sutherland. “Obviously, my top responsibility is to protect the bank’s interests in the long run, but I also know that relationships are about being there when we are needed. That’s not going to happen if we bail out at the first sign of trouble.”
Regular communication is critical to building the relationship, and that includes letting your banker know as early as possible if you are heading into rough water.
“We will work with a customer to fix a problem and if it can’t be fixed, we will work with them to get out in an orderly way,” he says.
He also has advice for business owners to help them avoid getting into trouble in the first place. He says some smaller businesses in particular will often overlook the financial fundamentals they need to remain profitable and head off trouble before it starts.
“Number one, they need to put effort into information systems so that they can track the business and know how it’s doing. The days of taking a shoe box of receipts to your accountant at the end of the year are over. For example, you need to know right away if the increased cost of fuel or parts is under cutting your profitability, and if it is you need to take action to address it,” says Mr. Sutherland.
Equally important, he adds, is to deal with a banker who understands your business, the sector in which you operate and any applicable factors such as seasonality that may come with it. That way, if you do get into trouble, chances are your banker has seen it before and knows how to help.