Do The Workout Before You Receive The Demand Letter

Why must so many small business owners wait until they get the demand letter from the bank before they acknowledge and understand that they are better served if we approach the bank in advance of receiving it? Is it avoidance? Is it belief that something is going to magically happen to intervene? What is it? This delay is certainly not beneficial to the workout results, yet we see it all the time.

Simply stated, if you wait your options are fewer, your capital available for the transition far less, and the time allocated for you to design and implement either the turnaround or workout is also curtailed. You are far less powerfully situated. The final blow to this “wait and see” strategy is the possibility that it has already been turned over to counsel which diminishes the possibility of working directly with the banker to work things out more favorably. The lawyers will move to collect their judgment which, while not fatal, has certain detrimental aspects that are better avoided. It is never a surprise, the demand letter is going to come, this is a certainty. The only unknown is the date of delivery. So once you are in default, what’s the point of stalling unless it somehow serves a specific purpose and is part of your plan?

Too many times we consult with a potential client in default and devise a strategy that will yield great results only to have him decide to “wait and see”. A few months later when the demand letter comes and lawsuits are flying, bank accounts are attached or levied or cleaned out, receivables are attacked (and on it goes) he calls in a panic – and a far weaker position – asking, “Now what?!” Don’t delay. Do your workout before the demand letter arrives!