From Inside the Vault...

Each year the Georgia Society of CPA's hosts the Southeast Accounting Show.  I had the privilege of presenting a case study on banking relationships offerring business banking advice to CPA's who in turn can help their clients.

The case study took three banking relationships of clients I've worked with and determined some best practices in each situation that made it successful.

Believe it or not, a start up company can obtain financing from a bank.  I told my audience that the business plan prepared by the CPA really help this client obtain bank financing.  Also, the bank was an experienced SBA lender.  So, this client was able to obtain financing with the help of an SBA lending program.

The second case was a company that lost money in 2008 and was transferred to Special Assets (can anybody out there relate?)  Management did an outstanding of turning the company around, but the bank still wanted the company out.  The loss really leveraged the balance sheet which made it difficult to find another bank.  The two things that helped us find financing was we were able to tell the new bank a good story of how management turned the company around and how that was sustainable.  The other factor was that we had equity in additional collateral that could be pledged to offset the leverage.  When your bank tells you your company is undercapitalized, they are either looking for you to contribute additional capital or pledge additional collateral.  In this case, my client had equity in his company building that was accepted and we closed the deal.

I saved the best for last.  The third case was a company that lost money for the last three years, the bank transferred the company to Special Assets and my client was asked to sign a forbearance agreement.  The lesson learned here was that we were able to move the company line of credit with the help of a banker that had moved to a new bank and wanted to take this client with her.  In addition, we were successful at negotiating the remaining loans in the forbearance agreement by reading the fine print and being to negotiate the details.  You don't always have to sign the agreement as is.  We were also successful at getting the bank to waive the forbearance fee which was a savings of $14,000 for my client.

I was told after the presentations that lessons learned were 1) the importance of a business plan for a start up 2) pledging additional collateral can offset leverage and 3) clients can negotiate forbearance agreements and get fees waived.  Be willing to read the fine print and negotiate the details.