Believe
it
or
not,
your
banker,
not
your
customers
or
suppliers,
could
be
the
critical
success
factor
for
your
business
in
2010.
In
the
last
two
rounds
of
meetings
with
members
of
Chief
Executive
Boards
International,
I'm
hearing
some
appalling
stories
of
banks
bailing
out
on
small
business
customers.
These
are
CEBI
member
companies
whose
banks
have
told
them
their
credit
lines,
never
late,
never
in
default,
will
simply
not
be
renewed
in
2010
("we're
just
not
interested
in
that
type
of
business").
One member quoted a banker as saying, "We'd rather have one $2 million line than ten $200,000 lines on our books". And similar nonsense abounds. These are rock-solid businesses owned and run by rock-solid people. Something is bad wrong with the underwriting criteria that's turning these customers away. I don't know what happened to the TARP money, but I can assure you it's not being loaned to small business customers.
In most cases the bank's excuses have nothing to do with you -- it's something that's changed on their side. Maybe your banker and former advocate left. One member cited a bank that had suffered a $3 million default the prior week -- suddenly they pulled back his already-committed loan and he's shopping again. Maybe their marketing strategy changed. Who knows?
Those members whose banks haven't flatly refused their business are tightening the loan covenants on renewals -- higher equity requirements, higher depository minimums, etc.
So, what can you do? Go wide. If you're under pressure from your own bank, you need to put a package together -- company overview, strategies, etc -- just like you'd do if you were selling the company. And, of course, the traditional 3 years of financials and tax returns. You might as well stack it into one huge PDF -- you'll be sending it a lot of places. Then, contact dozens of banks -- not two or three, and do it in parallel, not sequentially. Your "bank package" will limit your initial contact time investment to a phone call and an email.
If you're not under pressure from your own bank yet, get to know as many bankers as you can -- you may need an alternative quicker than you think. Somewhere out there is a sane banker looking for opportunity. They're apparently few and far between, so it's a numbers game to find them.
And something else you can do -- a defensive strategy. If you even suspect your bank may be getting ready to pull the plug on you, make sure you have a second depository account in another bank (that the bank holding your note or line can't get their hands on) set up and ready in case you need it. If they really get the claws out, you don't want your operating capital within their reach. There's probably a covenant that says you're not supposed to do this, but if your bank with whom you've been a good customer for years suddenly turns on you, fair is fair.
Don't lose your nerve. Keep in mind they probably won't shut you down. These guys are not fools. They know that if you're dead you can't pay them anything. So, it'll start with threats, escalate to "workout", where they step up the principal repayments, etc. You don't have to go along with every demand. Stall, balk and resist, therefore buying you time to keep shopping for a bank that wants your business. The first "go away" date they give you is just for talking purposes.
PS: If you're a banker and reading this, be aware that if you want to, you can own the small business market in your city. The opportunity is there to bank good companies who have had years of successful track records, temporarily impacted by a lousy economy. They're still good people and they're still good businesses. The mainstream banking industry has abandoned this market, and it's yours for the taking.
One member quoted a banker as saying, "We'd rather have one $2 million line than ten $200,000 lines on our books". And similar nonsense abounds. These are rock-solid businesses owned and run by rock-solid people. Something is bad wrong with the underwriting criteria that's turning these customers away. I don't know what happened to the TARP money, but I can assure you it's not being loaned to small business customers.
In most cases the bank's excuses have nothing to do with you -- it's something that's changed on their side. Maybe your banker and former advocate left. One member cited a bank that had suffered a $3 million default the prior week -- suddenly they pulled back his already-committed loan and he's shopping again. Maybe their marketing strategy changed. Who knows?
Those members whose banks haven't flatly refused their business are tightening the loan covenants on renewals -- higher equity requirements, higher depository minimums, etc.
So, what can you do? Go wide. If you're under pressure from your own bank, you need to put a package together -- company overview, strategies, etc -- just like you'd do if you were selling the company. And, of course, the traditional 3 years of financials and tax returns. You might as well stack it into one huge PDF -- you'll be sending it a lot of places. Then, contact dozens of banks -- not two or three, and do it in parallel, not sequentially. Your "bank package" will limit your initial contact time investment to a phone call and an email.
If you're not under pressure from your own bank yet, get to know as many bankers as you can -- you may need an alternative quicker than you think. Somewhere out there is a sane banker looking for opportunity. They're apparently few and far between, so it's a numbers game to find them.
And something else you can do -- a defensive strategy. If you even suspect your bank may be getting ready to pull the plug on you, make sure you have a second depository account in another bank (that the bank holding your note or line can't get their hands on) set up and ready in case you need it. If they really get the claws out, you don't want your operating capital within their reach. There's probably a covenant that says you're not supposed to do this, but if your bank with whom you've been a good customer for years suddenly turns on you, fair is fair.
Don't lose your nerve. Keep in mind they probably won't shut you down. These guys are not fools. They know that if you're dead you can't pay them anything. So, it'll start with threats, escalate to "workout", where they step up the principal repayments, etc. You don't have to go along with every demand. Stall, balk and resist, therefore buying you time to keep shopping for a bank that wants your business. The first "go away" date they give you is just for talking purposes.
PS: If you're a banker and reading this, be aware that if you want to, you can own the small business market in your city. The opportunity is there to bank good companies who have had years of successful track records, temporarily impacted by a lousy economy. They're still good people and they're still good businesses. The mainstream banking industry has abandoned this market, and it's yours for the taking.
