Lending Relationships: Managing Through Coronavirus Concerns

March 21, 2020

By Robert Katz

As we navigate through the uncertainty of the impact of COVID-19, here are five strategies to keep in mind for managing your lending/banking relationship through these challenging times.

1. Try not to panic. You are not alone.

We understand the concerns you are facing are significant. But consider: With deep experience and multiple customer accounts, it is likely that your account officer is used to working through challenging situations and can assist you. We are working in uncharted territory, and planning for the unknown can be unnerving. Remember you built your business by doing extraordinary things, so focus on solutions and keep moving forward to avoid the paralysis that can set in in times of uncertainty. 

2. Communicate early and often.

Touch base with your lender as soon as possible. Even if you have no requests, let them know that you are on top of the situation.  If you are going to make an ask, schedule a meeting in advance and allow enough time to be well-prepared.  Let your account officer know that you are working on a contingency plan with multiple alternatives to streamline the business and operations, and that you are maximizing cash flow to bridge you through the business disruption caused by coronavirus.

3. Know what to present when making an ask.

Lenders appreciate prepared borrowers. When requesting a sudden increase in your line of credit or additional lending availability, your lender will want to know the following:

  • How much do you need?
  • How long will you need the incremental funds? (Understanding this may be tremendously difficult to answer, prepare as best as you can.)
  • When will you pay it back?
  • Are you pledging any additional collateral?
  • Are you willing to provide an equity infusion?

Prepare a set of well thought-out cash flow projections with underlying assumptions to answer the aforementioned questions.  Projections should include multiple scenarios.  You only get one chance to make a good impression, and being prepared will help you make the most of it.

4. Do not be afraid or embarrassed to ask.

For a variety of reasons, it is not unusual for business owners to be hesitant to make these kinds of asks, especially if you have never done it before. In more than 28 years of working with companies and organizations in extremely stressful situations, I have almost always found that if you are well-prepared, present the facts, and are able to address your stakeholders’ concerns, the lender is more likely to approve your request. I am not suggesting the lender will always grant your request; however, following these guidelines will give you the best chance.  

The do not hesitate principle applies to other business issues you may face. Everyone has an inner circle of people you have known for a long time, whether professionally or personally, who would do anything for you if they could. Utilize the excellent resources you already have to tackle coronavirus challenges.

5. Time is of the essence.

At the end of the meeting, summarize your ask and do not forget to thank your audience for their time, support and consideration. Inquire when you can expect to hear back.  Respectfully hold them accountable to the timeframe they commit to so that the process does not drag on and you can move forward. 

EisnerAmper understands the disruption the Novel Coronavirus and COVID-19 disease is causing, its impact on your financial and operational performance, and the effect on your lender relationship.

About Robert D. Katz

Robert Katz CPA is a Managing Director of EisnerAmper Financial Advisory Services Group, and works with public and private companies, in and out of bankruptcy, to create and execute the strategy needed to restructure or improve operating performance.