A Dozen Indicators That Say You Need A Debt Workout.

I find that most small business owners prefer to wait and see what happens as opposed to “getting in front of the train” by being pro-active in response to changing conditions. They’re like deer trapped in the headlights of an oncoming truck, frozen into non-action… and then getting run over when a simple leap would have taken them to safety. Preferring to close the barn door after the horse gets out. We have all been there.

So, in case you’re wondering if you should do a workout, or just waiting to see what happens, review the list below and check off the items you are experiencing. Draw whatever conclusions seem appropriate and then call us. We can help.

1. Inability to make loan payments, or struggling to make them. In arrears or frequently late.
2. Not taking a paycheck, using personal credit cards for business needs, investing retirement capital (401k, IRA)
3. Credit cards maxed out and in arrears, shut off and in collection, accruing 29% or higher interest.
4. No inventory, with gaps between shipments and production because there are no supplies or materials on hand.
5. Prime suppliers have you on COD (Cash On Delivery).
6. Many secondary suppliers have cut you off and put you either into collection or a law suit.
7. Not enough work to keep employees busy, many employees jumping ship.
8. Missing an occasional payroll or asking your people to hold their checks until a certain date. Not paying payroll 941 taxes.
9. No advertising and marketing budgets.
9. In arrears to your landlord.
10.Spending most of your time managing collections and juggling cash flow, receivables and payables, rather than paying attention to your business.
11. Sharply decreasing revenues, increasing costs and overhead.
12. In foreclosure on business or personal loans.

If even one of these key indicators are occurring, you are on the downturn path. If more than one is happening in your business, you had better call us quickly, we can help. Call Norm and he will arrange a no-obligation teleconference for us to discuss your options: 413-584-2581.

An Easy Way to Understand How Bad Our Economy Is, and What You Need to Do to Survive and Prosper.

It is a very complicated issue with many, many diverse factors affecting our economy, far too many to easily understand it or to discuss remedies, as is evidenced by the many opposing opinions we see every day from many very smart people. However, I will simplify it and give a quick view of exactly where our economy is and where it is heading so we as small business owners can plan accordingly.

Simply stated, our economy (in my opinion) is affected directly, and most intensely, by our huge unemployment numbers: 10-15% of our population is out of work. The percentage is higher if we count those no longer looking for a job or those working fewer hours/part-time or one job when they were formerly working two, and higher yet if we add in business owners out-of-business who were not counted on unemployment rolls, and even higher if we count students who were never in the workforce to begin with and now cannot get a job.

We have a huge economic problem that compounds and ripples throughout our economy. Fewer taxes are collected, more homes are going into foreclosure, fewer homes are being built, there are more bankruptcies… and on and on it goes, tanking our economy from within. It does not allow any growth to occur as no one has any cash to purchase goods and services, and many are facing personal catastrophe all over the country.

If we look deeper into small businesses, really small businesses (or micro businesses) with a half-dozen employees and doing less than a million in sales, and we see them closing up like clams, shut tight, waiting for something to happen and yet knowing that even if it does they are out of cash and can not reopen, cannot stock the shelves, cannot make the first payroll… in other words, they are permanently out-of-business.

It is being said that hundreds of thousands of jobs will never return, and therefore hundreds of thousands of the unemployed will remain unemployed indefinitely. This affects each and every small business owner out there and is the benchmark for our recovery. If nothing breaks the back of this massive unemployment, then better days for small business owners are far, far away and likely never to return to that state we enjoyed for so many years.

This means one thing to all of us. If you are still in business:

1) Downsize.

2) Reinvent your business to work in today’s economy, whatever that means.

3) Do your debt workouts as one thing is for certain: the debt you took on when sales where high cannot be supported with revenues so low and if the revenues are not returning, what choice do you have other than to work them out now? Not modify, but eliminate. Not with bankruptcy, but with strong business strategies.

There is business to be done, but not on the same terms and conditions as before. Change along with the economy and you may survive. Ignore these requirements and you will perish. Yes, unemployment makes returning to yesteryear impossible and requires new strategies, but they exist. Use them, or become a statistic—and not a very good one.

Call us for help. Norm will arrange a no-obligation teleconference for us to evaluate your position and provide you with solutions.

Two Secrets to Achieving Successful Workout Conclusions.

It seems so obvious that it defies logic; most people—lawyers, various representatives of borrowers in default, etc.—do not totally grasp, understand and do what a workout requires.

Know the process and embrace the enemy. Cooperate with the system without violating your own terms. Return calls, deliver all requested paperwork, show your hand face-up. You have nothing to lose, or hide, and cooperation goes a very long way in effective resolution.

This does not mean you need to agree with them. This does not require you to pay over more than you can afford, but it does require full and complete cooperation with the process. Making the bank’s job easy is a benefit to you in the long run and does not erode your position. Cooperation does not require you to deliver the conclusion the bank wants, only the procedures it requires. It is interesting to note that if one follows the process and cooperates at this level, the workout conclusion tends to be on your own terms—that is the secret.

We talk to many bankers who appreciate our deep understanding of the process and delivery as requested and required. They complain about lawyers and borrowers in default who make it more difficult than it has to be, people who resist providing information or cooperation and thus impede the workout process thinking this is the way for them to succeed. Not so! Presumably, the inability to pay debt service or refinance is clear and absolute. So what is the issue in cooperating with the process? There is little to lose and much to gain.

The real issue is that most do not understand what the process is and how to take full advantage of it so they fail trying. It’s unfortunate, as we see many workout efforts going up in smoke and resulting in massive loss and bankruptcy. This would be unnecessary if the players understood the rules of the game and worked within the system.

Thus I say, two of our secrets for success are:

1) Know the system, the rules and the requirements of the process.

2) Cooperate with the bank, fulfilling the requirements so a conclusion can be reached.

It takes experience and expertise to understand what the requirements are for implementing a successful workout and how to achieve this objective. Without this knowledge and experience, and thus expertise, there can be no success. Understanding the system and being a willing to work within the system are two of the secrets we employ to reach the best result possible. It works.

Don’t Believe What You Read in the Newspaper; It Does Not Apply to You.

The newspapers are reporting increased business activity, and thus, everyone believes the recession is over and that we are returning to the time when things were so good.

It’s not true. It does not apply to the very small businesses that you represent—the $1-2 million dollar business with 15 or fewer employees—or even under $1 million in revenue and a half-dozen employees. These are the small business owners I speak to every day. These businesses are the real deal, the backbone of the country, and this is where the real damage is being done and recovery is an illusion.

As you all know, the statistics regarding recovery are focused on larger business operations that are easy to measure, have plenty of capital and are in control of much that happens around them. These larger manufacturing, financial services, home-building businesses, etc., are easier to track and monitor and are, in many instances, reflecting small improvements. However, this does not mean the same growth and development applies to small business as we know it. It does not mean the recession is over and that we can all breathe again.

The small businesses we are talking to have lost their working capital and their credit lines, have maxed out their credit cards and their retained earnings are gone. They held on to employees longer than they could afford to and have no capital left to emerge from the recession. Additionally, the revenues are not returning quickly for this sector and even if it is demonstrating some increased activity, too much damage has been done to the small business owner to afford him an opportunity to grow and reap benefits of any uptick that may be going on.

This is where the real pain and suffering exists and this is where debt service is long in arrears. There was insufficient capital available to carry their business during these lean times, and thus, even if there is an uptick, there is no capital available to take advantage, hire more, stock more, build more. Further, their loans are in arrears with banks demanding more cash then they have.

What to do?

Easy. Follow the plan. Downsize to make your business as small as possible, and yes, let as many employees go as needed to balance your profitability with your overhead and expenses. Reinvent your business to be profitable under today’s changing terms and conditions. Then, do the workouts. Your debt is the anchor around the throat of your business and it will choke you to death.

Things may be getting better for the moment. I doubt it, but some report they are. The long-term view still predicts much more trouble on the horizon for our economy and business environment. Do not be lulled back into a sense of false security. Continue to engineer the changes required to not only survive, but to once again prosper and grow. It can be done, even in a downturned economy, if you follow the right path. Downsize, reinvent, do the debt workouts.

Do it now. Call us if you ned some help, guidance or directions. Call Norm at 413-584-2581 and he will arrange a no-obligation teleconference for us to discuss your options and review your situation.

Sometimes We Have to Throw a Hand Grenade Into the Kitchen!

Debt workouts are very tricky. They are an uphill battle on a very steep and slippery slope. A successful workout requires gaining the attention of the players involved, bank and clients, as well as other creditors and participants, whoever they may be.

At times we must move people into decision-making mode or they will forever do nothing about their situation. Occasionally, we must force people into action. When this situation occurs, we can never be certain as to exactly what people will do, what decisions they will make, what the outcome will be… but we do know that whatever the results are, we will be prepared to channel them into the conclusion we want. Opportunities open up, people commit themselves and we respond knowing exactly what to do the moment we see the opening. We call this “throwing a hand grenade into the kitchen”.

Bold, daring, aggressive and creative methods, yes, but built on confidence, experience and skill.

There are only so many responses that can occur, thus we are usually fully prepared for any that we get. We are experienced, so we are very good at predicting the likely outcome. Sometimes, however, we need to flush someone out and get them to commit and this is one way we do it. A “controlled train wreck” we call it. While daring, it works for us when we need it.

Debt workouts are part science, part art form. This is where it comes together, and this is what it takes to do a workout: science and art. Taking risks, but with skill and confidence. What a combination. Does it always work? Yes, of course. While we may not know in advance exactly what will happen, we do know what is likely to happen and are prepared for whatever fallout occurs.

Are we ever totally surprised? Very seldom. But, should it happen, it’s no problem as we have written the script and even if a player malfunctions on us, the strategy supports success no matter what. There is little risk in blowing up the kitchen and whatever happens accelerates a conclusion. This is part of the art form of engineering a successful workout.

Because we usually know what will happen in advance, any twists and turns are recognizable and acceptable. They’re only road bumps in our path, never road blocks. Join us for the ride; it will be the ride of your life! A workout will save your economic and business life. Sometimes we just need to blow the place up!