Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
HOW TO TURN AROUND YOUR DISTRESSED COMPANY
07 :: How to get through a loan workout.
by Andrew Tellijohn
IF YOUR SITUATION is tough and you?ve fallen behind or gone into default on your loans the process for reversing that can be painful, but it can also be survived.
Banks loan you money in good faith. All they want is to be paid back. In decades past, lenders might have been more inclined to foreclose in these situations. But lender liability verdicts have made them more likely to work with borrowers, if they think there is a chance they will be repaid.
Approach your lenders early when you realize you are having problems ? if you don?t they are going to find out anyway and then they will force you into these discussions. When you talk with them they?ll likely put you through a loan workout, a series of steps the lender and borrower go through to resolve delinquent loan payments.
There are several results you can experience from a successful loan workout. Banks might be willing to extend their terms, lower their interest rate, reduce monthly payment amounts ? perhaps even temporarily to interest-only terms ? or they might change or waive other terms of the loan.
The most important factor in surviving the workout with financing intact is having a plan that will convince your lender that you can turn the business around. Spend some time investigating why the business is struggling. Figure out how you are going to change those problems and set a timeline for doing so. Present to the lender short-term cash flow projections, financial trends and an updated business plan under your new proposed terms and discuss new management or marketing strategies that will help you get there.
They also understand that sometimes things go awry, but it?s in their best interests to see you succeed so they are usually willing participants in a restructuring ? as long as the business owners do their part. If you?ve done your homework, bankers and other lenders will be more willing to cut you some slack and work together with you to try and save your business.
Second, don?t wait until the bank has started threatening your loan status. Lenders want to see you succeed so they can make money. And they have seen many of the problems your business might be experiencing. So rather than hiding from them use their expertise to see if they can help in your turnaround efforts.
Finally, undersell and overproduce rather than vice versa. Most entrepreneurs create turnaround plans with grand profit visions that end up failing. Bankers would rather see a conservative plan that starts low and has a chance to exceed projections. Be candid, honest and credible and you?ll have a chance to come out of your workout OK.
Do be extra vigilant about meeting each detail of your workout plan. If you are to review financials every week for a while, for example, always be right on time with that review. Schedule time in your day to specifically work on the workout, because many times the information-gathering takes much more resources than you?re used to.
Whatever it takes?from yoga to scream therapy?recognize that you?ll need to manage the stress you?ll feel throughout a loan workout. You can?t afford to get testy with the specialist who?s managing your workout, even though that person may be a junior-level officer at the bank whom you?ve never met before.
The loan workout process is not pleasant. Suddenly you?ll have people telling you exactly what to do, questioning your every move, and for many entrepreneurs that?s a new feeling.
CHECKLIST
? Have a plan.
? Talk to your lender early on rather than waiting until the financial struggles are beyond repair.
? Determine factors that have led to your struggles and present steps to lenders that show you are addressing them.
? Undersell and overproduce rather than vice versa.
As the name suggests, Owatonna-based Kamp Automation looks for customers with a process they’d like to automate. It could be a small, inconvenient, tiny part that people can’t assemble. It could be a high-volume product so needed that the customer can’t find enough labor to produce it in the necessary quantities. “We’ll work anywhere from medical device companies to the seed industry for corn and soybeans,” says Kent Patterson, co-founder, president and CEO. “We just jump all over wherever there is custom automation.” The company started in his garage. Patterson and his partners built a machine. The company started to grow to the point where now it has 48 employees — and had a bunch of people and stuff in different locations. “We went from a garage to a shop to a shop and just kept moving to new places and signing leases,” he says. “We got to a point where it’s like, OK, this is getting big enough and sustainable — we felt that we wanted to look for our own space.’”
