Your Loan has Been Assigned to Special Assets…What Now?

Even if this were possible, it would likely behoove you to change banks anyway, since you’ll forever be wearing a scarlet letter “W” (for Workout) in the mind of that bank’s officers. So, make the mental cut: your bank has decided that it no longer wants your company as a customer, and expect that once you are in Special Assets, you will have to replace your lender.

What to Expect Next

First, if you even suspect that you might be a candidate for assignment to Special Assets, get out in front of the issue with your banker. Ask about your bank’s process when a borrower begins to experience distress. Does it transfer the loan to a Special Assets department? If you are borrowing from your bank’s asset-based loan department, that group typically handles its own workouts, since its lenders presumably know the collateral well.

What are the triggers for your institution in transferring credits to workout? Are there any other borrowers in the printing industry also in distress at your bank? Does your lender simply want to exit the printing industry?

Take the bank’s temperature—how aggressive is it with customers assigned to Special Assets?

• Your lender will likely increase reporting requirements.

If your loan is secured by the company’s receivables and inventory, expect that your lender will notch up the reporting requirements that relate to the collateral. Monthly reports will be changed to weekly. As excess availability under the lending line gets tighter, your lender may request daily reports.

The bank will likely also increase the frequency of field exams, physical inventory counts, appraisals, and testing of receivables to estimate the probable percent of recovery in the worst-case scenario, should the company cease operations and have to liquidate. Even if the company has not been asked to provide these reports in good times, expect that the Special Assets credit officers will ask for them, all of which will be at the company’s expense. Prepare your accounting staff for additional reporting to the lender.

• Prepare yourself and top managers to hear terms that may be upsetting, such as GOB (Going-Out-of-Business) analysis, OLV (Orderly Liquidation Value) appraisal, bankruptcy and foreclosure.

Mark Hahn is a Managing Director and Founder of Graphic Arts Advisors, a boutique strategic financial advisory and consulting firm focused exclusively on the printing, packaging and related industries. He assists company owners and management, as well as their lenders, investors and shareholders in the following areas: mergers and acquisitions, sale of business, strategic and financial advisory, capital structure and funding, financial analysis, interim and turnaround C-level management and business valuations. Mark is the author of The Target Report and is regularly published and quoted in printing industry trade and management journals. Mark can be reached at
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  • charlie

    Mr. Hahn’s article is accurate, but understand there is no sudden notification as to the status of your loan. Reputable lending institutions will notify you about covenant status prior to your account being turned over to the work out department. In addition understand that any account a loan officer turns over to work out is a black mark on your loan officer’s record. So they don’t want this to happen.
    Mr. Hahn suggested get on top of your loan. This is spot on. If your business has suffered lately your bank is going to spot it in your financials. Contact your lending officer. before you tneder your financials Find out what their financial status is. Ask what their position is on current loans, where their growth is projected to come from.
    Be protactive, do not put yourself in a defensive posture. Go over your financial with your lending officer Ask how you look compared to other customers, what they think, and how their loan committee would view a loan using your financials. This will tell you everything you need to know to avoid surprise pone calls regarding status.
    You may want to consider taking their recommendations and possibly shop your loan.
    In any regard, lending institutions do not benefti from calling loans. However, they will act to minimize their risk and exposure. Be proactive. If you are leveraged, eye your business as a banker would, not a printer.

  • Thomas J. Walker

    Excellant article. I doe collateral verifications and field audits for SAD of banks. It has been very helpful not only to the banks but also the debtor companies. I have assisted companies with getting financing from other sources as well as identifying where a debtor company has moved assets out of state without bank approval. In one case it helped the business stay in business, in another case saved the bank in excess of one million dollars by negotiating with the owner to pay up because of the seriousness of the situation.

    We also do ABC’s, hundreds a year. They assist a busines in exiting a business without having to file bankruptcy. It is one of the best tools available to a troubled company, yet one of the least used.

    I will contact you, Mr. Hahn, to discuss taking this article and practical use to the next step. Thank you for posting this article.