The coronavirus pandemic essentially served as a real-world stress test for organizations, and it remains an unpredictable force in our society. Leaders and executives are making significant decisions without reliable information amidst a constantly shifting economic and regulatory landscape. Whether your company adjusted to a painful new reality, pivoted to new products and services or experienced a surge in demand, all organizations should evaluate their ongoing response and pinpoint what worked, what didn’t and what could be improved.
Financial services are critical to the long-term viability of a business, yet the global pandemic and resulting economic uncertainty present a challenge even to the most well-established banking relationships. Lenders and borrowers must contend with ongoing government restrictions, changes to the oversight of the Paycheck Protection Program (PPP) and the ongoing frustrations of trying to resume operations in these unprecedented times.
A successful banking relationship starts with communication. Banks prefer to be informed up front about matters of potential loss to their customers, versus discovering them later in the process. This transparency allows lenders to develop plans that are acceptable to regulators and attractive to borrowers. Follow the steps below to foster productive communication with your lender during these unprecedented times.
In recent years, business has become increasingly complex. Understanding what information and documentation your bank needs from you and the preferred format or optimal presentation is a helpful place to start. Establish a cadence of touchpoints with your bank to discuss recent achievements and challenges. Make sure you understand loan terms and any applicable covenants. Your accountant or assurance professional can help make sure you provide the necessary and accurate information to support financial reporting covenants.
Share all relevant information – both good and bad – with your bank. Transparency is critical when it comes to applying for credit, evaluating ongoing financing needs and maintaining a plan for future strategic and operational changes. Before you submit any type of credit request, make sure your bank has a firm understanding of your business’ strengths and vulnerabilities.
You should never be the only person who maintains the organization’s banking relationship. Exclusive relationships or monopolies on certain contacts represent a significant risk to the business. Introduce your management team to your bank, and be sure that all of your critical service providers understand your organization, including your legal counsel, accountants, brokers, etc. In addition to mitigating the risk of concentrated knowledge, connected teams usually work more quickly and effectively.
Create networking opportunities for your bank, and expect the same of them. Let them know your needs, and ask if they have any clients that could be of value to your organization. Remember, every business is a relationship business – hopefully this will never change.
Ask your bank what other resources are available. Sometimes the best available credit facility may not be a product offered by your primary bank. In addition to the PPP and Economic Injury Disaster Loan (EIDL) programs, there could be other governmental, nonprofit and local programs offering funding opportunities and grants to eligible businesses and organizations. Your bank may be able to help you identify programs, determine eligibility and support you through the application process.
RKL’s team of financial services industry advisors has decades of experience helping businesses and organizations prepare the necessary financial and supporting documentation for loan applications and maintain good standing with lending institutions and other financial partners.
Contact your RKL advisor or use the form below to start the conversation. Stay tuned to our blog for upcoming installments of our Response and Recovery in Focus series and visit our Business Recovery Resource Center for more insights and guidance.