Build a better banking relationship

By fostering a strong connection with a banker, a propane company owner gains access to valuable financial resources, improves creditworthiness and benefits from tailored advice to navigate various financial and business challenges.

What can you do to enhance your relationship with your banker?

Communication is key

Open lines of communication form the foundation of a successful relationship with your banker.

“We want to know the person we are working with, not just the business. We want to know their goals, both for the business and personally,” says Mark Diebus, senior vice president of Middlesex Savings Bank, who works with customers in the energy industry. “Keeping your banker informed builds trust and demonstrates your commitment to transparency.”

Not all bankers understand the propane business, so it is up to you to educate your banker about the unique aspects of the industry. Invite them for a site visit to view operations firsthand and update your banker on market developments that may impact your business. Other unique aspects of the business that your banker should know about include issues like tank ownership; the impact of fluctuations in steel prices; hedging; the value of automatic versus will-call customers; and the value of your customer list, which is an off-the-books intangible.

Be proactive in communicating changes in business strategy, financial performances or expansion plans. Do this by scheduling periodic meetings with your banker to discuss your company’s financial needs and goals. These meetings are an opportunity to ask questions, seek guidance and explore financial solutions that align with your business objectives. Maintaining an ongoing dialogue not only strengthens your relationship but also helps your banker better understand your business’s unique requirements.

Understand financial needs

As a business owner, you should have a clear understanding of your financial needs and objectives. This includes identifying your short-term and long-term funding requirements, cash flow management strategies and potential risks. By having a comprehensive understanding of your financial landscape, you can communicate your needs more effectively to your banker, who can then provide more targeted and relevant solutions. This requires you to sustain a strong accounting function so that you have accurate and up-to-date information when you need it.

Among the data you should share with your banker are gross margin and per gallon margin, key financial ratios, hedging program costs, seasonal cash flow projections, targeted margin per gallon and the actual margin you realize, and segregation of operating and non-operating (or nonrecurring) expenses.

“Because of the nature of the energy business, with seasonal shifts and fluctuating commodity prices, we tend to focus less on revenue and more on gallons sold and the margin at which they were sold. I know holding to a targeted margin can be difficult in a competitive market, but it is something we look at closely,” says Diebus. “There is a tendency to think of energy as a recession-proof niche. But you still must pay careful attention to the right KPIs and actively manage your business.”

Build trust, credibility

Earning the trust of your banker is the only way to build a strong relationship. Demonstrate your commitment to financial responsibility by maintaining accurate and up-to-date financial records. Timely payments, responsible credit utilization and adherence to agreed-upon terms and conditions can also help establish your credibility as a borrower.

Transparency is another key factor in building trust. Be honest about any challenges or setbacks your business may face. If you encounter financial difficulties, communicate proactively with your banker and work together to find viable solutions. By being transparent and collaborative, you can foster a relationship built on mutual respect and trust.

“Transparency and honesty are essential for a good banking relationship,” says Diebus. “We need our clients to trust us enough to share changes and updates, whether good or bad. A good banker can help you solve difficult problems with an analysis of the numbers and work with you to find a way through, perhaps with modifying covenants, a deferral of principal payments or a restructuring of debt.”

Seek a banking relationship, not just transactions

Instead of viewing your banker as a transactional partner, strive to cultivate a genuine banking relationship. Invest time in getting to know your banker personally and understand their expertise, experience and areas of specialization. Building rapport and a personal connection can go a long way toward creating a more productive and mutually beneficial working relationship.

Try to leverage your banker’s expertise beyond traditional banking services. Engage in discussions about industry trends, economic forecasts or regulatory changes that may impact your business. By viewing your banker as a trusted adviser, you can tap into their contacts, knowledge and insights to inform decisions you will make in your business.

“You tend to find more personal attention and more flexibility when dealing with a mid-size, locally based bank as opposed to a big national bank. Just as a propane dealer lives and works in the community, we do the same,” says Diebus. “We really do want to help you succeed.”

Explore value-added services

Beyond traditional banking services, many financial institutions offer value-added services that could benefit your business. These may include educational resources, networking events or workshops aimed at helping businesses thrive. Stay informed about such offerings and take advantage of them to enhance your business acumen and expand your network.

You should also stay informed about various financial products and services offered by your bank. This knowledge enables you to make informed decisions and engage in meaningful discussions with your banker. Whether it is exploring credit options, investment opportunities or cash management tools, understanding the bank’s offerings allows you to make the most suitable choice for your company.

Leverage technology solutions provided by your bank. These include digital platforms for financial management, online banking services, cash management services, merchant services for credit card processing and application programming interfaces (APIs) to integrate banking services with your software system, enabling seamless data exchanges for enhanced efficiency.

Not your grandfather’s banker

The once staid professionals of the banking industry have evolved to become innovative, adaptable and helpful allies for growing businesses. It will benefit your energy company to build a relationship and take advantage of your banker’s expertise, connections and willingness to partner with your business.

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Marty Kirshner is a partner in the Energy Practice Group at Gray, Gray & Gray LLP, a business consulting and accounting firm that serves the propane industry. He can be reached at 781-407-0300 or powerofmore@gggllp.com.