"I Am Working with My Bank and They Are Cooperating..." Forget It! Keep Dreaming, it Ain't So

I am working with my bank and they are cooperating...forget it! Keep dreaming, it ain't so.

NO, THEY ARE NOT COOPERATING; THEY ARE SIZING YOU UP AND PREPARING FOR THE TAKE DOWN, THE LIQUIDATION, AS IT IS SURE TO COME.

You are fooling yourself. It is not going to work out for you. Stop this insanity and pay attention.

A simple fact: It is estimated by many bankers we speak to, that at least 95% of the loans that go into the Special Assets Department or the Workout Department or whatever it may be called, end up liquidated. That's a fact. In fact that's the plan, the pre-existing mindset, their context. It is their last opportunity to milk more payments, seize or perfect more collateral, gain additional collateral, gain additional guarantors, locate additional assets they will later seize. It's all a preparation for what surely will come, liquidation. Improving their position, while they have you cooperating thinking you are truly gaining ground and effectively working your issues out.

Another fact, the bank will only do a few things such as:

a. Allow interest only payments for a short while - Big deal! What happens in a few months when full payment returns?

b. Extend amortization period, lowering monthly cash flow out - Great! Even longer payback period which is unaffordable in the long run and never a chance to build equity.

c. Reduce interest rates, reducing cash flow out - Will help a little but it is putting a band aid on a broken bone.

d. Possibly even allow a deferment, nonpayment, for a few months - Great until it's over, then what?

None of these addresses the real problem: too much debt, not enough revenue.

In the end you will have only postponed the inevitable... failure, foreclosure, auction and the remaining unpaid debt falls to your personal guaranty and you will have lost your business and then be confronted with a huge debt you cannot repay. It is a very ugly situation and is happening every day all over the country.

Since I know very well, that most small business owners want to pay their bills, honor their debts and commitments, I understand your desire to cooperate with the bank when the bank sounds as if they want to do something positive that may work.

But when you took out the debt, borrowing money based on revenue and projections that warranted such debt and it was affordable; you had no idea that a deep and dark recession was about to engulf us all.

However, it did. Now you cannot possibly afford the level of debt you once could as now your revenue is deeply diminished and cannot cover large debt commitments. What to do?

There is only one option, one alternative, one plan of attack that works: debt forgiveness. It's our strategy as it reduces and removes the principal debt, forever, including your personal guaranty. No bankruptcy, no legal process, a pure business strategy that ends with deep, debt forgiveness.

When so many people I speak with tell me the bank is working with them so they are ok, I know they are kidding themselves and not looking very far down the road when the relief is over and the demand for full payment returns.

Even if the restructure is long term, you will never enjoy any equity in your business as any sale of the business will result in a full payback to the bank... not you.

It is not the right conclusion. The bank entered into this deal with the same assumptions you made, current and projected revenue will remain in line with the debt owed so it can effectively be serviced. If the revenue is gone, and everyone made a mistake, why shouldn't everyone who is in the deal suffer appropriately and share the losses together. It was a failing on both sides: bank and borrower, I do not understand why the bank believes and borrowers follow the need for borrowers to shoulder 100% of the loss and banks to enjoy 100% of the gain. It is not a moral issue; it is not a matter of keeping your word. The contract assumptions failed, both parties to the loan should share in the losses.

Do the workout we propose, with debt forgiveness. Working with the bank is fulfilling their goals, 100% payback, nothing for you.

Stop believing the bank is working with you, it is not so. They are working towards liquidating you in the most meaningful way for them and then chasing you for the shortfall on your personal guaranty. That's what you are going to get... a stick in the eye.