(True Or False) Having A Relationship With A Bank Will Make It Easier To Borrow in The Future

 
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Do relationships matter anymore?

Yes, relationships do matter. But not in the way you are thinking about.

The banks of today are highly data-driven. They rely less on qualitative parameters (e.g. trust and familiarity), which are more subjective, and have adopted quantitative parameters (e.g. revenue, numbers and figures) to measure risk and justify the lending decision.

So how important are relationships?


1. Two different relationships exist today.

Between you and your bank, only your financials matter to your bank.

But between you and your relationship manager (RM), a strong existing relationship can make the difference between a business loan approval or rejection.

This is because your RM helps you to bridge cold hard numbers.

The fork is used for stabbing while the spoon is used for scooping, serving very different purposes.

The fork is used for stabbing while the spoon is used for scooping, serving very different purposes.


2. But how would having a strong relationship with relationship managers
make a difference?

A typical loan approval process at the bank involves an in-depth reporting & analysis of your company, and approval by a senior bank staff.

A good relationship with your RM will usually mean that he/she will be more motivated to present the best image of your company to the approving authorities.


3. So should I borrow a small sum to establish a “relationship” with the sole intention of obtaining credit easily in the future?

Short answer:

No.

Long answer:

No, because this might create negative consequences instead. Our stand is that you do it only if you are absolutely confident that you can make the loan repayments promptly.

If there are any irregularities, late payments or detection of negative cash flow, it may affect your future loan applications.

However, to establish a useful relationship with relationship managers, simply treat them with respect while be honest and upfront about your business needs.

That will improve your loan approval chances tremendously.

Learn to read the signs

Learn to read the signs



 
 

About The Author

 
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Eric Koh is passionate about helping SMEs grow and has spent years interacting with business owners at OCBC and IFS Capital. He is interested in 70s Rock n Roll, the odd novel and copious amounts of historical trivia.

Connect with him via eric@lendingpot.sg


Top photo adapted from: Freepik

 
Eric Koh