Tips on Strategically Approaching Loan Workouts
Entrepreneurs and small business owners have been among the hardest hit by this new economic reality. One particular burden a lot of companies are dealing with is debt. If you’re going to thrive during the crisis, you may need to restructure the terms of your loans. We are here to help you strategically navigate loan workouts, so you can survive the crisis while maintaining productive relationships with your creditors.
Loan Workouts are a restructuring of your loan to help you recover from the debt without filing for bankruptcy. Your bank usually wants you to remain out of bankruptcy as much as you do. Despite the reputation that banks and private lenders are sharks that will take everything from you if you fail to make a payment, they, in fact, want you to succeed with your loan. The bottom line is that banks and lenders almost always make more money if you pay your loan off. Even if you are behind on payments and full repayment looks doubtful, they want as much money back as possible. In stressful times, creditors are willing to work with you on solutions that will benefit everyone.
When entering a negotiation with your lender, here are 5 things to help you work with your lender:
1. Keep the long-term perspective. You want a creditor who will be your partner for the life of your business. Remind them of that, because they want that too (think repeat customers). If they don’t have this mindset, you may want to consider structuring a workout so you can move on from them.
2. Know your financials and have detailed financials ready. Your lender is sometimes required to review these financials, but having them in front of you will allow you to know your options and will help you and your lender come up with creative solutions.
3. Evaluate the value of the collateral. Make sure you know the value of the collateral you have for the loan. If the value has increased or decreased, it will impact negotiations.
4. Come with options planned out. This is where it helps to talk with someone who understands how to navigate loan workouts. If you’re going it on your own, keep the long-term context and think of the leverage you might have.
What collateral did you pledge?
How big are they?
What is the loan term and what works for your business? Maybe you need a payment deferral or forbearance—if so, make sure you get the events of default waived.
5. Stay persistent, polite, and professional. Remember that your creditor, or the person working with you, may be dealing with pressures outside of their control.
As you begin to move forward with a loan workout, never forget that your creditors want to work with you, not against you. Especially in difficult times such as now. If you follow these five steps, you’ll be on your way to success.
For a free 10 minute consultation with one of our attorneys give us a call at 385-355-0471 or sign up for a time here.