MA250: pub operators advised to build relationships with banks 'before they need to'

By John Harrington

- Last updated on GMT

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Hansen: “Don’t just accept the relationship you have with your lending officer"
Hansen: “Don’t just accept the relationship you have with your lending officer"
Pub operators have been encouraged to build relationships with their banks “before they need to” and make sure that the relationship is “multi-layered”.

Speaking at last week's MA250 conference in London, Peter Hansen, founder of the leading corporate finance advisor Sapient Corporate Finance, said that in the past five years banks have been “obsessed” by their return on capital.

He added they are “charging more and lending less” due to the countervailing pressures of needing to show they are lending and reducing their level of gearing.

Given this challenging environment, Hansen shared advice that he’s been given from operators and those in banking circles.

He said: “One of the things that a finance director said to me, who has been involved in both the ‘good bank side’ and the ‘bad bank side’, is to see them as a partner and not a threat, and build a relationship before you need it.

“You want to get them emotionally involved in the business and show them how it operates.”

Hansen suggested that  operators should build up a “multi-layered relationship” with their bank.

“Don’t just accept the relationship you have with your lending officer.

“You want to meet his boss and you want to have the ability to meet someone from credit, so that you have a relationship with the bank in case the relationship manager moves around.”

Hansen said bank managers want “tons” of information about the businesses and “granular levels of detail”.

Another key point for operators was to make sure that business plans always incorporate a downside analysis as well as an upside analysis.

“It’s not that banks don’t care about the upside — they are never going to see the upside,” Hansen said.

“What happens if sales fall off by 10%, or 15%? Look at the worst sales drop you’ve ever experienced and show what the impact was on profits.

“It’s [about] answering the questions they could have asked before they raise them.”

Hansen highlighted the view of one chief executive who said banks should be seen as suppliers, and that operators should attempt to shop around before choosing which one
to bank with.

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