The Legacy of the Loan-A-Ranger Is Renewed

“You win games on your strengths not on your weaknesses.”   Bear Bryant

It was a beautiful but chilly evening in the late spring of 2009.  Steve, the CEO of a small local business and I had just met to go over the details he experienced in the previous three days.  He had just signed the papers on three separate loan transactions that generated a net decrease of $6,000 per month in cash outflow from his business. Signing the documents resulted in everything he wanted and needed which, after careful scrutiny and analysis, would help preserve his company during this recession and prepare the company for stronger financial footing when the local business fortunes changed for the positive.

We sat on the patio of the restaurant to toast the occasion. Steve was thrilled and so proud to have closed the deals that greatly reduced his cash outflow and that would make so much difference for the company as well as for his and the families of all of his employees. The sense of relief showed on his face and in his eyes that the ordeal with his lenders was finally done.  About 90 days prior he didn’t think things were going to work out at all.

After our toast, we reflected on the past several years that led up to this huge occasion.

His story leads to another story – mine

How the Loan-a-Ranger came to life

We met when I first moved to the small mountain community several years prior. In order to connect with business owners of the community I had joined several associations. Steve was in more than one of these and we gradually became friends. We were sitting together after one of the meetings and I asked Steve the history of his business.

Steve had been in business over twenty years ago and it had been an uphill climb until about seven years ago.  Starting in 2002 his hard work, perseverance and networking with the right people started to pay off.  Annual profits began to increase, word of his knowledge and business was spreading and people were calling him from the surrounding states to do business with him.

As his relationships with local bankers improved, Steve increased his borrowing, putting his profits in local real estate investments and diversifying his asset holdings.  Economic times were good in the area, there were more banks than possible loan or deposit customers, and lending requirements were lax. An honest business man with strong ties and commitment to the local community, having an excellent payment history and a sound business that easily cash flowed all debts, he was a wanted borrower by all the local banks. Steve had always been extremely mindful of interest rates and because he was a ‘prime borrower’, he usually got the lowest rates offered by each lender in the community.

Steve noticed in late 2007 the signs of some economic shifts. His intuition told him this economic downshift might last for several years. He began to tighten his belt on expenses, looking for ways to reduce or cut unnecessary spending and for ways to increase profit and top line revenues. His major strategy was to stockpile cash.

One day in early 2009 I received a call from Steve. He explained briefly his view of the current economic situation and said he wanted to visit with me about his business and possibly engage me to help him with several pending loan situations.  We scheduled a meeting for the next day.

After a friendly greeting the next words out of his mouth were,

“I don’t know what I’m going to do!”

I listened and took notes, asking a clarifying question every once in a while, as Steve spent the next hour explaining his dilemma.   As Steve told me his story, I could tell several things were bothering him, aside from his current business issues.  Reaching into his pocket pulling out a small pill case he confessed to all of a sudden getting severe headaches, one of which he was currently experiencing and having stomach pains on a frequent basis like acid reflux, which he had never had before.  He admitted,

“I believe the stress and anxiety of this economic climate and having to confront bankers is affecting my health!”

He had stockpiled cash the past year. While business was active, top line revenues were down by a fourth.  Several moves he made years ago to increase revenues and profit he just now determined were losing money and by trying to help others in the community, he was grossly overstaffed.

After listening to his story, I agreed to help him and suggested we go back to his office so I could get copies of financials, tax returns and several other items I needed to properly review his current and overall financial picture. As we were pulling some financial data from his files, he outlined what he was planning and what he wanted me to do for him.  He had several sizable real estate loans that he was hoping the banks would reduce his payments on and one large loan that was maturing soon. He told me the bank with the maturing loan refused to renew the loan for more than one year. Steve’s goal was to move the loan to another bank and seek a three or five year loan. He feared the country was facing a period of years with hyper inflation and since loan rates would likely skyrocket, now was the time to lock in a low rate in order to keep his cash out flow at a minimum until the economy improved.

Part of his plan was for me to put the financial data into a format the bankers might want and then he would take the information to the various banks. I asked him if I could ask him some questions – which he agreed to.  I asked:

• What type of reception or reaction do you feel you will receive to your requests from the banks?

• Do you know the current mood of the bankers?

• What is the current financial position of each bank you will be visiting?  The banks’ current financial status or rating might determine their response to your requests.

• Do you have all the data the bank might want or need to help them make a decision?

• Have you thought through what questions the bankers might ask and what your answers will be?

• Do you know what paperwork the banker might have to prepare based on your requests and how you can help make the banker’s job easier?

• Are you prepared to pay fees to the bank as a result of a favorable response to your request?

• Do you have any idea or have you thought about where the mind of the bankers might go when you tell them your problems?

Steve thought about these questions for a few minutes and then somewhat defensively said, “You’d think I was being prepped to be witness on a court trial!”

I grinned at him and said, “You’re correct, you will be on trial and this is

life or death to your business,

so let’s get to work.” He responded, “I never thought about approaching bankers in this manner, but I guess you are right, it IS life or death, so let’s get after it”.

As I walked out of his office, tax returns, financials and appraisals under my arm, I told him I would call him in a day or so leaving him a list of the financials and other data he couldn’t find that I would need to properly put together a loan presentation and modification requests on the other loans.

At this point my mind took a quick imaginary trip and I saw myself sitting on an old porch with the retired Lone Ranger absorbing the wisdom he had gained in his years of rescuing people in distress.  It occurred to me these were new times and

business owners don’t need rescuing, they need empowering!

Returning to reality, I knew what I had to do in the ensuing years… help business owners who, although quite knowledgeable about their business and industry, needed needed someone to help

relieve the pain and stress of dealing with lenders and to help bring peace of mind back to their businesses and lives.

Several days later I met with Steve and I could tell he was approaching this task with a much different mindset than when we first met. I was optimistic we were headed in the correct direction but knew how he handled my list of suggestions would determine the success with the bankers.

As we both rolled up our sleeves to dig into the questions and how to best present his case before each individual lender, I realized because of the many years of being in a very competitive banking situation, good economic times and Steve’s being a good and honest businessman, he hadn’t been  required to provide the local banks the financial data normally requested of borrowers with the type and size of loans he had.  I quickly saw more changes in his thinking would be necessary.

As we walked through each individual loan scenario, my goal was to get him thinking in a different way:

• If this request is something you really want, how can you help the lender first?

• What is the lender feeling or thinking at this point?  Will your request compound his problems or help?

• You are requesting something of the lender; what will you be bringing to the party? Or, what are you also doing to positively affect your cash flow – cutting expenses, increasing revenues?

• Can you quantify the effects of what you are requesting on your cash flow?

• In a worst case scenario, what will you do?

• Can you prove what your cash flow will be like in six months with or without approval of your requests?  In other words do you have cash flow projections?

My goal was to have Steve do several things, most likely out of his normal routine, when approaching a banker:

• Think for the banker. Put the information in a format that the banker can easily and readily use to save time and provide as much information as the banker needs to prepare a loan presentation and submit it to a loan committee or an approving person. Don’t make the banker treat you like a hostile witness on the witness stand.  Be proactive in providing him what he needs. Help him help you!

• Improve the relationship with the banker by seeking first to understand his needs and what he is currently going through.  Act on the knowledge or information learned by communicating with the banker regarding your loan request.

• Know and understand the laws and policies the bank follows relating to your loans so you won’t be surprised.  Gear your plans around what you know they are able to do.

• Work with your strengths. Get professional help on those things you need to provide or bring that are not in your expertise.  Remember this is life and death for your business; put your best foot forward, not your least expensive or cheapest.

• Business is relational.  Do all you can to develop and sustain this relationship. The banker IS your partner and you DO need their partnership!

• Don’t give the bank any reason to be critical before you approach them with your request. Make sure there are no outstanding loan exceptions, past dues or overdrafts. Clean the slate.

As I coached Steve on these and other questions and helped him think through and prepare the written requests, I sensed a different attitude. He seemed more confident and optimistic about the prospects for his business in the coming months.  I could also feel a sense of peace and resolve return because through the coaching, he better understood the mindset of the bankers, what they were dealing with and how they would view his request.  He now had information in hand that would answer almost all their questions and in a format they could readily use to save them time. He was seeing his banker as a human being who really would want to help him.

As we were finishing Steve turned to me and said,

“It makes perfect sense to me now, especially about your concept of thinking for the banker and providing cash flow projections!”

Several days later Steve called after his first banker’s meeting.  He was excited.  He had received a favorable response.  He was thankful I insisted he “think for his banker” and prepare and provide cash flow projections along with all the other information the banker needed.  He said the president of the bank said to him, “This schedule is perfect. I can tell exactly what’s going on with the cash. It makes perfect sense to me.”

The next day he called again ecstatic. He had a second approval!  After he had presented the proposed debt restructuring, the loan officer said, “I can see clearly where the cash has gone and where you expect it to go over the next twelve months. Because you have presented me with everything I need in a format I can use and understand I’m able to give you a quick approval.”

Later that afternoon Steve called again,

“They all gave us the new payment terms we requested and needed”

As we were saying our good byes and planning a date and place for celebrating his success, I heard this noise like a rock hitting metal. What was that?” I asked.   He laughed, “My pill case!  I won’t need them anymore!