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

You’ve been taken by surprise. Your banker, whom you have known and worked with for years, calls to inform you that your loan has been assigned to the Special Assets department. Your immediate questions are, “What is Special Assets?” and, more importantly, “What does this mean for my company?”

The Special Assets or “workout” department is where the bank manages credit risks that have been classified at or above a certain defined risk level that is deemed too high for the bank to handle in an ordinary fashion. The borrower may have missed payments or breached loan covenants, and/or appears likely to do so in the near future.

In short, your loan has been classified as distressed, and your lender has decided to bring in its specialists that know how to best exit a loan. Yes, that’s right—your bank has decided to end its relationship with you, whether or not it immediately gives you a deadline for doing so.

The bank’s workout specialists already understand all their options, including their rights in a bankruptcy proceeding under federal law, assignment for the benefit of creditors (ABC) under state law, and the rights and remedies they may have under the loan agreement. They know how to push the right buttons at the right time to maximize their recovery.

You can expect the tenor of your relationship with the bank to change completely. There will likely no longer be any interest in maintaining the customer relationship of the past; instead, the bank will have its eye on the exit door, and it’s just a question of how long it will take to get there.

In some cases, your former relationship manager may remain involved, but he or she will no longer be driving the relationship. Be aware that loans go to die in the Special Assets department, and rarely will a client in workout be returned to the performing loan portfolio manager, with your banker friend back in the driver’s seat.

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.