Bank Demands Its Notes

Solution – We were contacted by a company that found itself in an adversarial position with its lender, following a period of two years of poor results.  We met with the company and spoke with the lender to get a sense of the problems.  Typical to many situations where staff has been reduced in a downturn, the company had not provided the bank with accurate or timely financial information.  At a meeting of all parties, we identified several objectives and a near term timetable to achieve them.  The company’s books had to be closed for two years, monthly reports generated, Borrowing Base Certificates completed, and a monthly forecast and cash flow generated.  In the process of helping our client complete these tasks, we also noticed that there had been considerable investment in tooling up for new programs.  All expenses associated with creating these tools and fixtures had been expensed; the expenses could have been capitalized, improving the financial results.

The company’s accountant agreed and nearly $700K of tooling assets were added to the balance sheet.  Providing the bank with timely financial information, together with the improved balance sheet as a result of the capitalization of tooling convinced the lender to enter into a forbearance agreement with the borrower, and also resulted in the lender providing some additional working capital by increasing the cap on the line of credit.

We work hard to improve the flow of information and the exchange of ideas with the lender.  This leads to better working relationships for our clients with their financial partners.