Never, ever accept your banker’s turnaround referral recommendation.

Here is the scene: You are on in some level on default on a loan to a bank,either in payment default, or perhaps you are in non-compliance with loan requirements. Thus, the bank is possibly getting ready to foreclose on you, liquidating your assets, calling the note, and demanding payment on your personal guaranty as well. A complete and total loss, business and personal, is in the making.

So, when your banker calls asking for a meeting you reluctantly agree to go, hoping for the best but knowing that this is dangerous ground you are walking on. Be very very careful, and consider the following reality.

The banker surprises you with an understanding discussion, although guardedly intimidating and threatening. The banker explains that you are in default, technical or real, and must come back into compliance as soon as possible. The banker may even give you a time period and a goal to reach, which he warns that you had best meet or his hands will be tied and he may have to foreclose…Bad news, but very nice about it.

Of course what he asks for is probably impossible to satisfy, including additional collateral, your wife’s guaranty, large and steady payments on the arrears, etc.

You must be polite and noncommittal, but never willingly give up what they are asking for as all they are doing is fattening their position so they can collect more in liquidation, which they are surely planning to do, once they have all they can get you to give them.

Never let your wife sign, especially after the loan is in jeopardy. If you do, you are giving them your home. Never give them more collateral than they already have. Why do it? You are not getting anything in return.

Try not to agree to a deal you cannot deliver as as soon as you breach it. They will liquidate you instantly especially if they have improved their position as much as possible.

This may all seem obvious, but here is the tricky one, the fox in a sheep suit, the “recommended” turnaround expert, who will help you turn your company around. Danger, Danger, Danger. This man is your enemy. The banker will tell you that you need such expert guidance. The bank will forgo immediate foreclosure if you hire a recommended turnaround expert who will guide you to solvency and improve your ability to pay the bank as required. Its a great idea, the banker suggests.

You will know his true colors when the expert turnaround man suggests that the bank will cooperate with extensions, etc., ( but seldom gives you what you need…more money) if you give them more collateral, like your home or your wife’s guaranty. Run as fast as you can, fire the bastard, and don’t look back. The liquidators are on the way and he is their advance man!

Think about it. After you, the bank will give him another stooge, and then another. He is the banks henchman, he is working for them not for you and he will deliver you on a silver platter, if you allow him too. They will frequently give you a list of two or three such experts allowing you to choose anyone you want ( as long as he is on the list hmmmm) feigning non-involvement, your choice. They are merely trying to demonstrate to a future court that they are not interfering with your business and thus are not subject to lender liability claims later down the road..

This turnaround expert will charge you lots but would never think of negotiating a workout with the bank, reducing the payoff to less then what is owed. He will not recommend that you do not give up your wife or additional collateral. He will find a way to add valuable collateral to the banks position, while presumably obtaining some valuable concession for you. Do not believe them, do not hire him and do not let him into your office.

If you are in danger, the workout man whom you hire independently is intent upon protecting your assets, reducing the pay-outs, and beating the bank in every way possible. The man you want is the bank’s enemy and your champion. The bank’s recommended man “works” for them.

There will be an unspoken and undefinable conflict of interest, your interest. So as reasonable as their proposal may seem, its letting the fox into the hen house…

Yes, please hire a turnaround expert, a terrific idea, but NOT off the banks preferred list. Why do you think they are preferred? Call me if you ned help 413-549-2966. I am one of those turnaround and workout experts.