The Banks Will Resort To Sneak Attacks On Occasion.

Yes, it does happen. Occasionally, banks resort to sneak attacks. Despite our best efforts to communicate effectively and set a mutually agreed upon strategy in a workout negotiation, occasionally it will appear that we’re gaining full cooperation and commitment from a banker while in reality, they are quietly engaging counsel to seize assets while appearing to negotiate in good faith. They’ll sweep accounts, attach receivables, and do whatever else they feel will protect their position and increase their payoff in liquidation. They fully understand such aggressive moves signal the end of the business and the end of the relationship, or so it would seem from their point of view. From our perspective, we simply dig our heels in and get the banker to undo the damage and recommit to the strategies we are promoting as being in the bank’s best interest. We are most often successful, although on occasion it can be painful and upsetting for our clients.

This appears to be the ultimate in bad faith, so why does this happen?

For a number of reasons:

1. The banks do not trust the outcome and thus despite appearing cooperative, they are sometimes willing to set a trap and spring it on you when you are least expecting it and are unprepared. Of course, we always prepare our clients for the worst and thus we prevent major loss in such situations, but it is upsetting and it forces us to respond to such aggressive acts by working to undo the damage and get back into our strategy.

2. A “boss” instructs the banker to protect the bank’s position and follow through with liquidation procedures. Once the process is initiated (which could have been months earlier) they are occasionally unwilling to cease the effort. It is best to get to the bank before they commence such aggressive acts as it is then infinitely easier to control and stop them.

3. They are frequently misunderstanding the SBA’s requirement to “exhaust their legal remedies”, a requirement long ago removed from the banks. Still, the banks occasionally act as if they must “exhaust” them. We educate them quickly.

4. Bankers are constantly lied to and generally abused by defaulting borrowers, so until we “prove” our commitment and professionalism, they occasionally do not trust our assertions and strategies until they see them begin to unfold. Thus, they initially treat us with less respect then we deserve. However, this seldom happens as we have worked successfully with hundreds of banks all over the country and even if we’re working with a new bank, we can usually quickly and effectively demonstrate our skill, expertise and experience and the bankers almost always go along with us.

The reality is that we survive and overcome every attempt by the bank to undo our strategies. Our approach always wins out in the end and such upsets rarely happen, but the mere fact that they do occur, even if it seldom requires us to warn you in advance, illustrates that a workout is not a perfect program and the unexpected can occur. Issues can happen, but we always overcome them.

Hang on–it may be a white-knuckle ride, but it always comes to an end, and safely.