How does an under performing company move forward?

By Heidi Luck, SVP, Asset-based Lending

You see the writing on the wall...raise the issue early. Communication is extremely important in these difficult situations, and no lender likes surprises. Your lender is on your team and you will have to trust that your lender will not overreact. Ask for help when you need it. 

Normally when an established company is having difficulties, it is because there has been a fundamental shift in the company’s business environment: a new competitor, a competing product or process, material cost shifts, or a technology change. Something has had a material impact on the company. In those cases your lender should listen carefully to how management plans to respond. Your lender should analyze your projections; look to see if ownership is demonstrating support if cash is needed."I listen for clues as to how a company plans to turn their company around before I make suggestions or refer a turnaround consultant. I want to make sure they are committed to
success." Michael D. Sharkey, President, MB Business Capital 


Quite often tough choices need to be made. Are you willing to make tough choices like closing plants, laying off employees or instituting pay cuts? If these measures are in play and yo see no results it may be time to bring in a consultant. If you communicate well with your lender there may come a point where you both acknowledge that you need to get help from a consultant. You should require that your lender refer three individuals or firms. You want choices and the best fit for your particular circumstance, not the lender’s golf buddy that he owes a referral to.

Each turnaround firm has its own specialty and your lender should recommend firms that best suit your needs. One firm may have expertise in turning a company, another for liquidation, and yet another if there are legal issues to deal with. Receptivity from your lender and consultants may have ideas that vary. However, over the years there have been a number of great successes of lenders helping to save a company by listening, offering suggestions and lastly, referring a turnaround consultant.

In summary, if you are having difficulty in your business:

  • You need to communicate that to your lender early and often.
  • If you don’t have a lender that you feel comfortable telling that you have a problem, then you need a new lender.
  • Put together a detailed plan and demonstrate a willingness to make the hard choices.
  • Back up the plan with your own financial commitment.
  • Acknowledge that you need help if your plan isn’t working and hire the most qualified — not the cheapest — firm.

Signs you need help
Your lender can be your best ally:

  • Are your debts growing at a quicker rate than your profits?
  • Do you fear that your business might be heading into a crisis?
  • Is your business just in a slump or headed toward financial ruin?
  • Do you have frequent calls from angry creditors, constant overdue invoices, regularly missed sales numbers and unhappy employees?
  • As a business owner are you unsure as to how to fix your problems?

Based on panel discussion TMA Spring Conference, 2012.