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Coping in the new banking world
From the Desk of: Douglas H. Hancock b.a., ll.b.


  If you ever want to catalyze a discussion at cocktails, simply ask the attendees to comment upon their relationship with their banker. Quite probably, there will be little, if any, complimentary words offered.

  I am not rushing to judgment by stating the foregoing. Of course there are many good bankers, but the banks themselves leave much to be desired. This is true from the perspective of both the consumer and the business owner.

  Although the economy has continued to expand, credit remains tight and in some industries, all but impossible to get. As a corporate commercial lawyer, I offer the following recommendations:
- Always shop around. This may seem obvious, but in most circumstances your existing bank
  will offer you less favorable terms than a competitor.
- Never, and I mean never, use your revolving credit facility to make a capital purchase.
  I routinely seen bankers recommend that their customers purchase capital equipment
  through their revolving credit facility. Months later, when the credit line is at its limit,
  the banker will be looking for an injection of equity from the owner. This position will be
  taken although the banker himself created the situation.
- Consult with other institutional lenders if considering the purchase of capital assets or
  commercial property. Banks are often unwilling to consider financing commercial properties.
  Approach the Business Development Bank of Canada which may be prepared to look at your
  capital acquisition.
- Spread your business around. Bankers will likely push hard for you to consolidate your
  business with them. Resist.

  If you run into financial difficulty, all of your banking relationships will be imperiled if you are dealing with one institution. Moreover, the day when your relationship with your banker mattered is over. Even if you are lucky to cultivate a relationship, your banker will not be with you for long.

- Consult with a financial intermediary. Although mortgage and loan brokers may have a bad name, although perhaps not as bad as lawyers, they may be able to obtain better financial terms than you can on your own.
- Avoid a shotgun approach to obtaining credit. Banks now rely upon crude scoring methods and each credit inquiry will count against you.
- Recognize that the time when all that mattered was whether or not you would repay the loan is dead. Try to fit in the box that the bank wants. If the choice is between deferring income and obtaining a loan, be prepared to recognize the income in order to obtain the financing. The foregoing represents the views of the author and is not intended to represent the views of the firm or this magazine.

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