Open Communication Helps Your Bank Help You

In this week's Financial Forum, we'll discuss one of the common mistakes rental business owners make, which is failing to let their banker know when they're having financial difficulty.

I have heard this on several occasions: "I'm not delinquent yet, so why would I ever tell my banker I'm having trouble or anticipate having cash flow issues this winter." Rental business owners are fearful of ruining their credit rating and feel that asking for a restructure will do just that.

But in truth, the worst thing you can do for your credit is fail to plan ahead for what you feel will be difficult times, causing you to become delinquent on your loan schedules.

First, a restructure does not hurt your credit if you approach your banker with a solid plan, if you are current on your payments, if you have reviewed all of your cost lines and if your forecast is conservative and realistic. The best way for your banker to find out your financial situation is to tell him yourself. You don't want him/her hearing it from other creditors or other banks.

Our average client has 18 financial institutions they borrow from and usually there are 6 to 10 banks behind those banks. Your bank and your banker do not want you to fail, but remember they are in the business to make money, so they need to understand their collateral position and their risk in the present economic environment. But before you call that meeting with your banker, you should prepare a detailed plan and forecast for 36 months. (We'll discuss this in further detail in a later issue.)

Forthcoming editions of Financial Forum will include other fundamental and vital elements of financial programing, including:

  • Debt restructuring (continuing)

  • Marketing

  • Building your revenue base

  • How to set fair compensation for personnel

  • How to cut overhead business costs (lose the fat on your balance sheet)

  • Rate structure

  • Hitting all revenue lines

    And, to make certain we're covering your interests, we welcome your input. To submit questions and comments to Mike Farley, email

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