Blueprint for Success

Early Recognition of the Problem

Recognize the signs that your relationship with your Bank is suffering a breakdown. In almost every case, the business owners I dealt with were surprised and dismayed at their designation as a “high-risk” situation! They just didn’t recognize the signs and were shocked that their bank had not made its discontent crystal clear before taking this precipitous step. Here are some things to watch for:

1. Finding out that your operating loan account is running outside its designated margin. Although this may be a regular occurrence, don’t assume the fact that it happens regularly without much intervention from the bank, that the bank condones such breaches of its arrangements. Out of margin situations are cause for grave concern by the bank and a signal to their credit officers that something is drastically wrong with your business.
2. Finding out that you are over limit or that cheques have been returned. The latter speaks for itself, the former is never acceptable on a regular basis.
3. Requests for additional operating support are granted grudgingly and only on a temporary basis. If your bank felt you deserved the additional support, it would not be granted on a temporary basis only.
4. Credit department becomes directly involved with the negotiation of the credit line and visits your operation to “meet and learn about you”. Credit approval officers are, by nature and environment, reluctant to allow their judgement to be tainted by the niceties of relationships with clients, therefore, they seldom, if ever, meet the client face to face. If your account manager starts bringing credit approval people to your office, they either don’t understand the account or your intentions, or are losing faith in the credibility of the account manager. Either one is cause for concern. Do not confuse marketing officers such as regional or area vice presidents or other executives with credit approval people. They are typically identified by titles such as Credit Risk, Loan Approval or Risk Management, etc. When you meet one, you’ll know.
5. Receipt of a letter of non-tolerance for breaches of covenants or conditions. Almost without fail, the companies I dealt with traced the beginning of their woes to a letter buried deeply in the CEO’s or CFO’s in basket. It had never been replied to or dealt with seriously and was “just another one of those letters slapping our wrists”.
6. A meeting is arranged and a new player is being brought to the table for no apparent reason. Beware, this is likely the Special Account Manager (SAM) attending to take over the management of the account. He has an agenda and it is virtually iron-clad.