In a workout situation, it is NOT the bank’s goal to support your growth and development so you can pay them back.

Many small business owners have a gross misconception about what a bank will do with you when you are in default on a loan.

Once you are put into the workout department, which has a variety of different names to describe their liquidation process. “Special assets” is the one I like the best… you are going to be liquidated, it is merely a question of how and when and what the yield will be.

The great misconception I see and the enormous frustration which comes out of this misconception, is the belief in the heart of the small business owner that his new plan will turn his business around, and if only the bank will give him more time he will succeed and then be able to pay back the bank.

The banks position on this issue is the longer they let the defaulting client stay in business, the more erosion of inventory, accounts receivable and other meaningful collateral, so time is the banks enemy once the borrower is in default.

The bank is not interested or willing to hear about one more plan for success. They are not motivated by the empty promise that if given more time they will be able to succeed and pay back the loan. They do not believe it and it is not in their best interest, once the decision has been made, to take their loss and liquidate the collateral as rapidly as possible.

Additional guaranties work, additional collateral works, a self liquidation plan works, a sale of assets work, a foreclosure auction works, keeping you in business longer does not work at all.

Yet I see all too often that this is the gist of the survival plan small business owners present to the bank with great expectations that it will be received well and supported by the bank. They will not.

It will not work.

There are better strategies that enhance the opportunity for a small business to successfully navigate a defaulting situation, knowing the bank is intending to liquidate you for their benefit.

Call us to discuss your situation, we have a better plan.

Call Norm at 413-584-2581 he will arrange a no obligation teleconference for us to review your situation and discuss your options.