As experts at business turnarounds, we know that 70% of all businesses go out of business in the first 10 years of existence and the rest tend to disappear at a rate of about 2% a year. Even more have near death experiences as a business every year. It is likely as a business owner or operator you have not been in the kind of trouble you are in now financially which is why you are here reading this. Many businesses have gone through what you have. And when they got here they had the same incredulous thoughts you are having now.
The list below is 21 common statements made by distressed borrowers to loan officers and consultants as the reality of their situation is just starting to settle in. This list is not a finger wagging exercise, but a good way for you to see your circumstances and issues the way those around you see it. This list will not fix your company, but it is here to reduce the likelihood that you will make mistakes of those that have come before you.
This list is broken down into comments about a business’s relationship with their banker, feelings and trepidation about dealing with turnaround consultants as well as the very real concerns about the cost and time it takes to go through a turnaround. If nothing else, we hope that this list provides you with communications tools to speak to someone about your situation, and know you are not alone and others have been here before you. There is a right and a wrong way to deal with financial distress. Take the next step in your journey with this information.
Frequent Borrower Objections and Responses
Have you come close to missing? Is it a challenge? Are you cannibalizing collateral to make those payments? Are you also able to pay yourself at the same time? Are you contorting your balance sheet to make payments (slowing A/P, accelerating A/R)
By default do you mean missed payment or missed profit or other ratios? Maybe your financial trends have been getting worse? When is your maturity?
This happens. Banks react to broad industry issues in their portfolio. But for every banker getting out, there is someone lending into the industry, albeit sometimes at higher rates.
It is really your bank and not your banker. Their policies are counter to your interest. They are not valuing your relationship and it is time to find a new lender.
This is a clear sign that you need a new banker-advocate. That likely requires you to find a new bank.
They want cash flow and this takes tools for communication that you may not have been presenting.
You cannot know everything there is to know about business in general. It is helpful to get a fresh set of eyes on your current situation.
Every business is different, but there are a lot of common features that others have insights into that can help you. Every business has sales, operations, compliance/accounting, HR. There are professionals that can help with the industry and general business issues that are common features/issues you are dealing with.
It is possible that what you have done does not answer for the stress/issues that you are facing. You may need to have a professional that understands these issues help. A professional can help quiet the noise and take the negativity away from you.
Haven’t we already tried that? It is time to have a fresh set of eyes.
Haven’t we already tried that? It is time to have a fresh set of eyes. Maybe those people could use some help. How committed are they to you and sticking around for the change?
Do you have people in the business that are relevant to the trends in the industry?
It is not that hard for an accounting professional to put together a cash flow model. It is much harder to translate that into tangible action items to make change. What KPIs have they produced form the cash flow model for you to use?
Newpoint has a proven track record from years helping hundreds of clients, there is a 80%+ success rate in improving financial health of your company if the recommendations are followed
Investigation is the key word (1) Newpoint primarily operates on a remote-first principal which reduces the on site visual presence that causes a lot of these concerns (2) message this process as improvements, employees that do not want to improve or change are not worth retaining (3) all information discussed is highly confidential (4) investigation will provide you a fresh set of improvements that you can make by yourself or with Newpoint’s assistance
We are not a investor types, also we sign a NDA, Newpoint has worked with hundreds of companies and there has never been taken to task over company secrets or data.
This process is about communicating your value proposition in a way that a banker can understand; this may not be just your current lender, but a new lender is going to want to know the story as well and Newpoint is good at finding and explaining situations to bankers
How long will it take to get that amount of capital together? Do you have all the funds or do you need financing? After payoff do you have enough capital to operate for the next six months? In order for your current bank to work with you during this process, partnering with Newpoint will buy you months of time with the bank and shorten the time it takes to raise capital and find new money options.
That is the most expensive and punitive process to endure for you as an owner. There are many more options that are faster and cheaper that achieve better cooperative outcomes; 92% of small businesses that file Chapter 11 fail to confirm their plan and get converted to Chapter 7 and liquidate; also most Chapter 11 plans run for 3 to 5 years which effectively turns ownership into a salaried employee for that time period.
Cash is king and if they are going to pay for it, then they are going to control all decisions around payments to vendors, salaries, etc. You cannot afford to fail and paying for this service will give you time and options to avoid failure
Your people could use some help with working on the business while they work on the day to day struggles; Newpoint can expand your company capacity quickly, we have professionals with more tools to assist.
Let us help the business you’re trying to save.
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