Key Takeaways:
- Think of a portfolio review as a business meeting with an invested partner who wants your company to succeed.
- The more people you have looking at your company, the more perspectives you have on how it’s doing.
- Expect to go beyond financial statements and have a discussion about everything from management, to people, to supply chain.
Whether you’re a new business banking client or have years of entrepreneurship under your belt, these two things are true: you’ll have portfolio reviews with your banker and those reviews can help your company improve.
As Amarjit Pandher, AVP, Business Development explains, clients can leverage portfolio reviews to their advantage by approaching them like a business opportunity.
“First and foremost, the bank is there to support you as your financial partner. That said, we’re also lending you money, so there are certain parameters you need to meet,” says Pandher, who’s based in CWB’s Vancouver banking centre. “And while, yes, a portfolio review is an important tool in how the bank manages risk, at the end of the day these meetings are just as much about protecting the client from exposure. With that in mind, your banker is part of your business’ due diligence process. This is one more way we help you build a better business.”
Pandher breaks down the purpose of a portfolio review, what to expect, how to prepare – and how to prime these crucial touchpoints to your business’ advantage.
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What is a portfolio review?
A portfolio review is when you go over your business banking file with your relationship manager. Typically, it involves a financial review, a report on your key business metrics, and assessing how well you’re meeting the terms or covenants you’ve agreed to.
If that seems intimidating, Pandher offers this reframe: “When you’re doing a portfolio review with CWB, think of it as a business meeting with an invested partner who wants your company to succeed. Naturally, that means looking at what's going well – and where there’s opportunity to improve,” he says. “We’re in the business of collaborating with our clients. We want entrepreneurs to thrive.”
He adds that if a client is offside with the bank’s terms, together they’ll probe into what’s transpired, how to move forward, and how CWB can help get them back on track.
Portfolio reviews generally happen once a year. That said, they’ll also be done if a client requests additional funds or there’s been a material event like an ownership change.
How portfolio reviews benefit clients
Portfolio reviews can be a valuable part of your business strategy. That’s because the more people you have looking at your company, the more perspectives you have on how it’s doing.
“As bankers, we have a different lens on your business than you do. For example, maybe you’re focusing on profitability, but not looking as closely at the balance sheet or the volatility of the balance sheet,” says Pandher.
“You might be paying more attention to income statements and how much money you’re making. Making money is great, but it’s just one piece of the puzzle. How are you hedging on your balance sheet to offset a risk or downturn? Are your assets truly worth what you think they are? These are things we’ll look at with you in a portfolio review.”
He adds that business owners know their business inside and out, but they may find the numbers and what they mean a little more difficult to understand. The bank can interpret them and provide insight into what’s impacting them – and how much.
“One of the aspects we’ll review is what you can margin for based on your business setup,” says Pandher. “Let’s use income-producing real estate as an example. We’d look at your tenancy. Has there been turnover? Are there empty units? We’d dive into this with you and talk about go-forward plans.”
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How to prepare
You’ll receive an email from your relationship manager in advance. This will outline the information you need to provide – like your financial statements and details on your financing.
Pandher says to also expect a discussion about everything from management, to people, to supply chain. “I always encourage clients to give good thought to their key risks, issues, or concerns. They should also come with potential solutions so the bank can provide feedback and guidance.”
He recommends coming prepared to speak to your highlights, your growth and growth trajectory, as well as your plans for the next three to five years. For example, if you share that you’re planning to sell your business, your banker can work with your lawyers and accountants to help ensure you’re getting maximum value when the keys change hands.
If your portfolio review was prompted by a lending request, Pandher advises making your information and details readily accessible to your relationship manager.
“Let’s say a client needs a bump of cash and it’s a rush. We receive these kinds of requests often,” he says. “Collecting information can hold things up, so organizing your documents ahead of time can help us get you an answer sooner. If you’re unclear on what’s needed, don’t hesitate to reach out to your banker and ask, ‘what do you need from me to get this done?’”
What to ask your banker
Clients should feel comfortable asking anything that comes to mind, says Pandher, but most importantly, they should feel comfortable asking their banker for their perspective on the business.
“Sometimes clients don’t ask because they’re afraid to. They have a perception about banks, there’s a stigma. I love when a client asks, what do you think about my business?” he says.
“I know the file well and I know what the client has told me about the business. So maybe I say, you’re running a great business. And I really like these pieces. But here’s what I think you could do differently. These kinds of conversations are gold for both the client and the bank.”