8 Tips for When the Bank Calls

July 21, 2020

8 Tips for When the Bank Calls

It is no secret that, due to COVID-19 and the collapse in oil prices that many companies in Alberta are in financial distress.  While lenders have generally cooperated during this period, business owners are now, with good reason, anxiously dreading the “call from the bank”.  However, that call does not have to mean the end of the business.  There are steps that can be taken and discussions that can be had with your lender to save your business.  Here are eight things to keep in mind when dealing with the bank:

  1. Ask – Is
    the business worth saving?
      The very
    first question you should ask yourself is whether your business remains viable
    under any circumstances.  As discussed
    below, working through an insolvency process takes time, energy and money.  If you believe your business is worth saving,
    however, it is all worth it at the end of the day.  So this is a question which must be answered
    at the outset, with honest self-reflection. Even if the answer is no, however, you
    should still consult an expert to come up with an exit strategy.
  2. Remember
    you are dealing Special Loans
    .  Remember
    you are not dealing with your regular account manager.  Banks have departments specifically tasked
    with dealing with companies in financial distress.  These departments have various formal titles,
    but are commonly referred to as “Special
    Loans
    “.  The thing to remember
    is that the Special Loans officer has no history with the loan, no attachment
    to your business and simply wants to achieve a positive result for the
    bank.  The Special Loans officer is experienced
    in distressed accounts, used to dealing with lawyers and other insolvency
    professionals and is primarily interested in resolving the account as
    expeditiously as possible.  Despite how
    it may sometimes seem, Special Loans officers also have no particular animosity
    towards your business – they deal in practical solutions.  Typically, they are willing to work with you
    if you are up front with them and diligent in your recovery process.  It is important that they have confidence in
    you and your efforts.
  3. Approach Special
    Loans as early as possible
    .  If possible,
    do not wait for Special Loans to contact you. 
    Rather, approach your regular loan officer and advise them that you are
    encountering financial difficulties.  The
    earlier the approach, the more solutions and options will be available to
    you.  In addition, delaying your contact
    with the bank when there are obvious problems can sometimes lead to an
    implication to the bank that you have been hiding your problems.  As mentioned above, Special Loans appreciates
    clients who are forthright.  If they lack
    trust in management, it is extremely difficult to complete a financial
    restructuring. 
  4. Identify
    the specific problem
    .  Special Loans
    will want to know why the loan is in distress. 
    Obviously, there are many possible reasons, which may be
    intertwined.  General economic
    conditions, unexpected events such as loss of a major client or supply, and
    obviously the recent COVID-19 pandemic. 
    Be prepared to tell your story. 
    Your insolvency lawyer can assist you with your presentation.
  5. Show that
    you have been working on the problem.
     
    If there have been steps you have already taken to address your
    financial distress, do not hesitate to advise the bank of this fact.  You may have already reduced your staffing or
    other costs, sold some non-core assets or engaged in refinancing efforts.  Retaining the assistance of insolvency professionals
    also shows the bank you are serious about resolving your issues. 
  6. Have a
    plan.
      It is always helpful to
    approach the bank with at least the outline of a restructuring plan.  It is not necessary that this plan be fully
    developed in detail, but if there is an outline, you should present it.  There are many options for a financial
    restructuring, including simply obtaining time to get back on your feet through
    a forbearance agreement with the bank, informal restructuring through sale of
    assets or divisions of the company and cost reductions, or Court assisted
    restructurings, including CCAA (Companies’
    Creditors Arrangement Act
    ) or bankruptcy proposal proceedings.  Within these options there are many
    combinations.  Your insolvency
    professional can advise you on the pros and cons of the various options.  The bank will appreciate it if you can
    present it with a plan from the outset.
  7. Use
    insolvency professionals
    .  Insolvency
    professionals are lawyers, CA firms and financial advisors who have experience
    in restructuring, receivership and bankruptcy. 
    Special Loans officers know these firms well, having dealt with them on
    countless matters.  Special Loans will be
    able to work with these professionals, knowing that they have experience, are
    trustworthy and are providing reasonable and sound advice.  While every insolvency has different nuances,
    in general, your insolvency professional has seen this situation before and can
    help you work out a plan to extricate the company from its difficulties.  Going it alone should not be an option at
    this stage. 
  8. Be
    prepared to work
    .  Financial
    restructuring is not easy.  It requires
    focus, energy and resources, including the cost of retaining insolvency
    professionals.  This is why the first
    question “is the business worth saving” is so important.  If the business is worth saving, the time,
    energy and expense is worth it.  You owe
    it to yourself, your employees and other stakeholders to consider all options
    carefully before making such a decision.

At Field Law, we are more than ready to assist you in your efforts to deal with financial distress.  We have lawyers at every level of experience and cost and are prepared to work out a plan which is within your budget and will be effective. 

Doug Nishimura

Doug Nishimura

Doug is an Alberta-based lawyer representing clients who are facing complex debt recovery litigation, financial restructuring disputes and other related business issues. These matters often involve the purchase or sale of distressed assets in a court-approved restructuring or receivership, and at times, through a bidding process. He has more than 20 years of experience representing the full range of parties involved in debt recovery disputes and restructuring proceedings, including corporate debtors, large and small financial institution and secured lenders, unsecured creditors on an individual and collective basis, shareholders of insolvent corporations, trustees, monitors, receivers and other court appointed officers and counter parties of insolvent corporations.

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