Exiting a Credit Before the Business Gets in Further Trouble Is the Best Help You Can Give Your Struggling Client
An increasing interest rate market coupled with concerns about a looming recession will have a negative impact on small businesses; that’s a given. And that means that more and more small businesses will start struggling or continue to struggle. It only makes sense, therefore, for bankers to look at their portfolios now and identify which of their clients are currently marginal or on the brink of becoming marginal. Six to nine months from now, these clients will in all likelihood be worse off and barely cutting it. Given that it will take time to get them out of the bank, now is the best time to give them notice.
No banker enjoys or is comfortable asking a client out. But it’s always better for everyone to exit a credit before a business gets in deeper trouble. It will save your borrower from being deprived of access to capital and it will enhance the ability of the bank to get repaid in full. If you wait, it will be tougher on your client, your bank, and on you.
To make it easier on you when exiting a client, it helps to have a list of alternative lenders (asset based lenders) to refer to your client. That way you’re not just asking your client out, you’re giving him or her options of somewhere to go. And you can complete the scenario by reminding your client that this is just a stop-gap situation; a period for the business to recover and to get back to bank financing (your bank’s financing!) in the future.
When handled in this way, your client will want to return to you when the business is ready, and good asset based lenders will allow the business to come back to you whenever it’s ready with no prepayment penalties. Your client wins, your bank wins and you win. That’s a great way to start the year!
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.