financial breakup

What To Do When A Financial Institution Breaks Up With You

financial breakup

Few events are more unsettling for a small business owner than losing the financial support of their bank or lending institution. In 2013, a major North American bank ended its relationship with hundreds of small and medium enterprises (SMEs) because of a change in commercial banking focus. It was not an isolated incident. “There can be changes in the overall economic or credit environment,” says Sol Roter, president of Liquid Capital Corp. Financial institutions, he says, “that may dictate whether to enter or leave whole industries, depending on circumstances.” This can be a function of the economy or a change in their lending portfolio profile.

Whatever the reason, the results can be devastating for SMEs that are caught unaware. Suddenly, lines of credit dry up. If too many receivables accumulate, it could push you into a cash-flow crisis. “It could even put you out of business,” Roter says. So what can you do to survive the sudden loss of your financial institution? Fortunately, the answer is plenty—if you’re prepared.

“You need to figure out what financing you need, and then update your forecasts and your business plan as quickly as possible,” Roter says. “Do a credit check on your firm and yourself to see if anything sticks out that you can correct before approaching a new financial institution.” Also, conduct a registration search to see if any registrations need to be dealt with in advance.

Once you’re sure that you’re in a position to put your best foot forward to a new institution, start working your network of contacts. Ask them if they have entrees with banks and other lenders that may want to do business with you. Ask your accountant, lawyer, insurance broker or anyone else you think can refer you. But sometimes conventional banks won’t touch less-than-stellar businesses. Says Roter: “If your business is hurting and out of financial covenant, you’re going to have to reach beyond conventional banks and approach non-traditional funders such as receivables financiers and asset-based lenders.”

Whomever you approach, there are other steps you can take to prepare for visiting a new financial institution. “It’s really important to prepare yourself properly,” Roter says. “On the credit side, if you don’t have an up-to-date financial statement, or you’re just not willing to discuss and deal with difficult matters, it doesn’t look good.”

Professional lenders will check into your background and it’s wishful thinking to believe that they won’t find shortcomings or, worse, skeletons. “Disclose it up front,” Roter says.  And in this era of pervasive social media, examine your online presence, including your personal one, for anything that may cast you in an unflattering light. Any  content that shows you behaving irresponsibly could affect your credit rating and, ultimately, your next banking or lending relationship.”

If your business is shipshape, keep an eye out for changes in the economic climate that may sideswipe you, as the banks tend not to view individual businesses in isolation. “Banks will signal into the marketplace,” Roter says, “but it’s nuanced. They’ll express in the media that, say, they’re concerned about certain sectors. These days it’s oil and gas. It shouldn’t be any surprise to oil and gas companies to find that the bank says it’s reducing exposure in that sector. It may be nothing personal.” The lesson here? Be prepared and always keep your eye out for new financial relationships.


Collaborate And Create For Business Growth


Entrepreneurship is alive and well with 27 million Americans either starting or running a new business. Research from the 2014 Global Entrepreneurship Monitor, sponsored by Babson and Baruch Colleges, offers a positive outlook noting that “24% of U.S. entrepreneurs expect to employ 20 or more people within the next five years, up from 16% in 2012.” The same study also places Canadian entrepreneurship rising, second only to the United States.

Collaboration and creativity can significantly contribute to a company’s success

A 2014 Kapost blog by creativity consultant Katrina Pfannkuch lists 10 Stats on Creativity That Will Change the Way You Do Business.

Three highlights:

  • Six in 10 CEOs cite creativity as the most important leadership quality.
  • 75% of people feel they are not living up to their creative potential. (Imagine what businesses can achieve if leaders unleash their team’s talent.)
  • Creative industries boast faster job growth than other sectors of the economy.

Choose your team carefully and keep it to a manageable size

Approach as if you’re creating a recipe. A team leader must be confident and able to delegate. An outgoing creative person can excite team members and open the door to group brainstorming. Someone with detail skills can keep track of what the group decides and what steps must be taken. Each “ingredient” will come together so that the best ideas are fully “baked.”

One way to expand the team’s ability to collaborate is to draw upon professionals who work from home. The infographic “The Evolution of Creative Collaboration” by cloud-software provider WebDAM estimates 20 to 30 million people work remotely at least once a week, accessing files and teams from the Cloud, increasing productivity and fostering innovation. When individuals change their routine, such as from an office to home environment, creativity can flourish.

Trust is vital to collaboration

It takes time to develop; it isn’t automatic. Yoram Soloman, who wrote “The Dynamics of a Creative Team” for Innovation Excellence, an online resource for optimizing creativity, explains that there are ways to speed the process. He notes three important factors:

  1. Partner team members with a personal relationship.
  2. Use bonding and team-building activities to create shared life experiences.
  3. Encourage face-to-face meetings whenever possible.

Above all, fuel your team with confidence. Give them a clear goal and the time and materials required to make it happen. Model how the team should operate. Listen, discuss and welcome all ideas from every team member. Once goals are achieved, recognize the individual efforts of each person.

Collaboration and creativity have been integral to Liquid Capital’s model for helping businesses succeed. Ask about our growth and back-office support that impacts businesses throughout North America day after day.