Your Loan has Been Assigned to Special Assets...What Now?
These are not terms you want to hear, as they clearly indicate the possible closing of your business. For the Special Assets team and service providers, these are everyday terms.
The lender may not have any intention of pulling the plug on your business (yet), but Special Assets will want an accurate picture of its position, including the worst-case scenario. Most professionals know that these terms can be misinterpreted, and they will be very circumspect in public or around your employees. But behind closed doors, you should expect and be ready for forthright and blunt language.
• Cooperate with the bank’s appraisers, examiners and financial advisors.
Delay will only end up costing more in the long run, and further jeopardize the ability of the company to survive. Help the professionals to understand the true value of your equipment, inventory and cash position. If you don’t cooperate, the appraiser, for example, will assume the worst and the result can be a lower valuation, which in turn will only make the lender more nervous about its position.
Accurate information will help the appraiser properly value your physical assets, and provide the best valuation. Since you will be paying for the appraisal, request from your lender that you be entitled to see all the reports and assumptions behind the numbers. You don’t want to be blindsided by a reduction in your availability caused by a low appraisal, which was based on wrong assumptions. Respond positively to these professionals and their requests for information and access to your managers, since cooperation will increase the lender’s trust in your ability to navigate the situation, and possibly lessen the pressure on the business.
• Your borrowing costs are going to increase.
The bank will likely impose fees for granting waivers or forbearance from immediate foreclosure. Expenses for the bank’s attorney to prepare documents will be charged to the company. There may an automatic imposition of a default interest rate. The costs for appraisers, examiners and other professionals will also be charged to the company.
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, mailing, marketing services, brand management, and related graphic communications industries. With more than 35 years of graphic communications experience in the areas of finance, operations, sales, M&A, and general management, Hahn has served as chief financial officer, chief operating officer and other senior positions with several commercial printing companies, as well as founding and eventually selling his own printing company.
The firm 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, business valuations and serving as consulting experts. Hahn is the author of The Target Report and is regularly published and quoted in printing industry trade and management journals.
Mark Hahn can be reached at (973) 588-7399 or firstname.lastname@example.org