Guru deals to stuffy bankers

Sarah Lochead-MacMillan. Photo / Janna Dixon

Seeing bad banking relationships needlessly driving businesses to the wall prompted Sarah Lochead-MacMillan to leave her high-powered job at the country's biggest bank to crusade for customers.

Last year, as the global finance crisis was really biting, the former senior relationship manager for ANZ began independently helping businesses get broken banking relationships back on track.

"I had a values clash between what a relationship manager should be and what they have the scope to be in the banking system," says Lochead-MacMillan.

"When you are looking after 70 businesses, you can't give them the attention you need to - going to their business, seeing how it runs and how that affects their finance needs and cashflow management."

She saw process-driven banks focus on minimising risk at the expense of working with an essentially sound business for a win-win outcome.

This meant customers who were willing to communicate and turn the situation around were not given time to do it.

"The bank managers just refused to believe customers were telling the truth."

Banks have not learned any lessons from this "explosive" economic period about dealing more effectively with businesses, she says. "It's an old, lumbering industry."

Describing herself as a bank mediator, Lochead-MacMillan assesses whether businesses are in financial distress because of a core failing or because of a breakdown in their banking relationship.

"People are frightened of the banks. I'm trying to give some power back to the customer."

If the bank can see a business can survive, it will get more money back by helping that survival. The problem, she says, is where customers cannot articulate how the business is going to survive in "bank speak", which is where Lochead-MacMillan comes into her own.

Not all her clients are at an impasse with their bank - some just want help to structure debt more cost-effectively, to understand the fine print and even how internal banking mechanisms work.

"A lot of business owners get a finance offer and are so pleased they sign without understanding all the obligations."

In good times, these may be loosely monitored, says Lochead-MacMillan, but in tight times banks clamp down.

"A relationship manager should explain all the terms and reporting requirements and how they impact the business, but that rarely happens."

What to do

If your business banking relationship has gone awry, ask yourself:
* Did I give the bank all the information?
* Did I give it the good and bad news?
* Did I involve it in my plans and expectations?
* Did I ask for the bank's expectations?
* If you did all this the problem may be your bank manager, not you, says independent business banking consultant Sarah Lochead-MacMillan.
* "Try asking two or three banks to tender for your business, you will be amazed at the results," she advises.

Banking tips

Run your accounts well - remember an overdraft limit is a limit, not a target.

If you are going to exceed your limit:

* Ask your manager in advance for the extra.
* Explain why you are going to exceed your limit and what the extra is needed for.
* Explain when the excess will be repaid and from what source.
* Stick to what you said.
* Keep your banker fully informed - banks can cope with bad news, they don't like bad surprises.
* Look at ways of structuring debt to fit with your business strategy.

Never take the bank's first finance offer without questioning:

* The rate or margin.
* Any fees.
* Any reporting required.
* Any covenants imposed.