Are You Preparing Your Clients for a Bank Exit?

After almost a year of COVID, banks undoubtedly have a policy about how they’ll look at PPP money’s effect on their clients’ businesses. The issue is: if a business has a loss for 2020, will the bank look at the loss as it normally would or does it factor in PPP money which, in essence, covers up the loss? In either case, banks need to know what they’re doing with marginal clients and PPP business owners need to understand their banks’ position.

For clients being asked to leave, these 5 steps will help bankers set the stage for an easier and quicker exit:

  1. Clearly communicate to your client why the business is no longer bankable.
    Make sure the owner understands the bank’s stance on PPP money and how it factored into the bank’s decision. Then explain what it would take for the business to again be bankable.
  2. Explain the exit process.
    Explain that when companies are not bankable, they are referred to alternative lenders such as asset-based lenders (ABL) that fill in the void. Explain that ABL is an interim step to help companies turn things around and get back to bank financing as quickly as possible.
  3. Educate the borrower on the benefits of ABL.
    That ABL instills discipline in financial reporting, provides guidance in operational performance, and the time for companies to fix the issues that got the business in trouble in the first place.
  4. Don’t give the borrower any wiggle-room.
    Once the bank gives a 90-day extension, that’s all the client hears and the process will drag on. The bank needs to decide if it wants the client out or not and if it does, push for a quick exit.
  5. Tell the client what to expect.
    It’s only fair to tell your client that ABL pricing is more expensive than bank financing but that they’ll only be with an ABL for a short period of time. And that because of ABL’s forced discipline; the business will be a great deal stronger when it returns to more traditional financing than when it left.


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.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or, or visit us at