Karen Adams, Senior Vice President, National Head of Business Banking, HSBC Bank Canada

Smart Practices for Small Business Banking

Openness and transparency are keys to a strong working relationship between a small business and its bank, says HSBC Bank Canada’s Senior Vice President and National Head of Business Banking.

Karen Adams stresses that a firm’s relationship with its bank should be seen by both as a “partnership.” And partners discuss their plans in advance and talk things out, including any misunderstandings or disagreements.

Similarly, the bank works closely with organizations like EDC to be able to do even more for its clients. By partnering, says Ms. Adams, we can provide a unified solution. This simplifies the financial process for small business and increases its growth possibilities at home and abroad.

Market analysts and government have been urging Canadian firms to tap more into foreign markets, especially emerging markets. Is HSBC seeing evidence of that?

Yes, HSBC is receiving many more inquiries from Canadian companies regarding trade, specifically importing into Canada, exporting from Canada and investing in operations outside Canada. For example, we have a client in the food services industry in Canada who wants to start sourcing some of its supplies from Pakistan. Our client visited Pakistan recently and met with HSBC and some of our customers in their industry, for which we made the appointments, to help develop this opportunity.

Are the current tough economic times hurting the ability of smaller firms to obtain financing?

There are parts of the world today that are doing extremely well – Asia-Pacific being one of them, driven by Hong Kong and China and the other strong economies of that region. So, Canadian companies that are exporting to that region are doing quite well. Those that are purely domestic or perhaps selling goods solely into the United States are not doing as well.

What advice do you have for a smaller firm looking to effectively obtain financing from their bank to grow both domestically and internationally?

The number one piece of advice that I typically give to small firms, or any firms for that matter, in dealing with a bank or some other financial institution, is that it is extremely important to be completely open and transparent. And then provide plenty of advance notice. You can’t hope to be successful if you say, “Look I need financing and I need it by next Monday.” So it’s important for small businesses to plan ahead.

To what extent should a business be working with its bank, even when it’s not seeking new or increased financing?

HSBC always emphasizes to our customers that we’re not just a service provider, “we’re your partner in growth.” In order to make that happen there are responsibilities on both sides and it’s important that business treat the banking relationship as just that, a relationship, and talk about what’s going on, even if there are no financing needs at the moment.

You talk about the importance of partnering with your financial institution. Can you offer us a real-life anecdote that illustrates how that has worked successfully?

Sure. We have a manufacturer of toys in western Canada, a growing company, a really keen entrepreneur, but she was getting in over her head. About three years ago she almost went bankrupt. We advised her that she had to have a full-time accountant, somebody who could get her finances in order.

So what happened?

She was distracted and her financial reporting to us came late…we had no choice but to send her business into an area called ‘special credit,’ where small businesses get intensive care and attention from HSBC, and fortunately she was nursed back to health. We got her larger facilities and encouraged her to hire a chief financial officer. I met this woman recently and she said, “You guys were delivering a really difficult message to me, but I got it together and I hired a CFO.” Their sales have since tripled.

How does HSBC work with EDC to assist firms with financing to grow their business abroad?

We have so many examples of partnering with EDC across the country. What we often do is partner to provide one solution to a small business that is exporting from Canada. For example, we will use EDC insured receivables as security for financing that we provide. We have found that this structure works very well. We are looking at working more with EDC in the future.

Are there other financing options that can help companies grow, especially beyond Canada?

There are so many options, everything from providing a line of credit, to structured-term financing. HSBC is particularly good at helping our clients grow internationally by providing trade finance for imports and exports, and by helping our customers hedge currency risk through foreign exchange. Typically, small businesses are not tapping the capital markets quite yet, but at the top of the pyramid that’s what is available, as well as private equity and venture capital.

Any other interesting options or incentives?

There are also tax breaks that a lot of small businesses don’t know about. We have a publishing house client in Quebec City that publishes online educational material and because they are developing their own content for a global market, they have been the beneficiary of a really great R&D credit, which they didn’t know about before we suggested they look into what’s available.

Five ways to bank on growing

Although credit conditions for smaller firms in general still remain tighter than before the 2008 financial crisis, Ms. Adams says access to financing is readily available for growing firms, especially those tapping into some rapidly expanding emerging markets.

Bank financing options available for small businesses include:

  1. Trade finance for imports and exports
  2. Lines of credit and working capital finance
  3. Foreign exchange lines for converting currencies and hedging foreign exchange risk
  4. Structured term loans
  5. Bank-approved sources of R&D tax credits and credit insurance that they use as security against their loans

Meet Karen Adams, Senior Vice President, National Head of Business Banking, HSBC Bank Canada. Karen Adams brings more than 15 years of international corporate banking and risk management experience to her current executive role for HSBC Bank Canada. Until April 2011, she was the CEO of HSBC Jordan, and has also worked for HSBC in China, India, Hong Kong, Dubai, South Korea and London.

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