The Only Answer Is A Debt Workout

I see ads for companies that promise they will “modify” your loan as if that will successfully change your destiny. I hear from clients about how they have asked the bank to lower their interest rate or extend their term so the monthly payment will be less, as if that will change their reality. I hear clients happy about “interest only” terms for three months and a promise that they may get three more months, as if that will change their cash flow enough to make a difference.

Let me be very clear: Your revenues are down, way down. Your overhead and fixed expenses and even your variable expenses are up, way up.

You asked for and received a loan based on revenue and cost projections that are significantly different than what they are today and yet somehow, the bank expects you to be able to service the debt no matter what the changed circumstances may be.

Remember, the reason we are all in this jam is not because any one of us failed at anything. The economy is in a meltdown for reasons well beyond our control and we are all victims of this debacle. If the banks would be willing to make the appropriate adjustments required to keep us all in business we could pay back a lot more than we could if we are liquidated under adverse conditions. Really what are your assets worth under auction conditions? Not much.

The banks, however, are not yet in tune with the real solutions so they offer crumbs. You need debt reduction, lots of it, at least 50%. That is the solution. Interest only is a laugh. Unfortunately, since they will not voluntarily do this we must take a stand and make it happen. It’s called a debt workout and the ending result, if done effectively, is the reduction or forgiveness of debt and the preservation of assets and the business.