Here are some important tips in handling a crisis with a bank or a lender. Maybe you are in default of your loan covenants. Maybe you just got moved to the workout side of the bank.
First thing to understand is this is a big deal. You have a lot riding on making sure you handle this problem properly.
Do it right and you live to fight another day. Do it poorly and your company may go under.
Put yourself in their position
Here are some points to focus on to help you get through a debt crisis.
Step one is to think like a banker or a lender.
- They make money primarily by not losing money
- As a result, they are all about mitigating their risk and exposure
- And they have deemed you a significant risk!
You’re job is to show your lender how you will be helping them reduce their risk.
Here’s what you need to do
- Meet with them personally to communicate your commitment to helping them reduce their risk
- Find out what a win looks like for them (do they want out of the loan or do they just want you to be in compliance with the loan covenants)
- Be available, don’t hide
- Be super responsive to their calls and requests
- Provide them accurate financial statements and provide them timely
- Provide monthly financial projections
- Provide weekly cash flow projections
- Update them frequently on the steps you are taking the fix the problem and mitigate their risk
Your strategy here is to create a win-win
You’ll be amazed how often you can create a win for you and your company, while also helping the lender deal with their problem, when you put your strategic hat on and go about this process in a measured and purposeful way.
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