Financial Challenge:
Strained Banking Relationship

A venture funded distribution company was experiencing an unexpected lull in its new business wins. Unfortunately, the company did not adjust its expense spend rate to align with the lower revenue stream. The net result was a reduction in realized profits with an unplanned series of creditor agreement financial covenant violations. Not having been warned about the downturn in expected profits and the impact on the covenants, the company's bank creditor aggressively responded to the covenant violations demanding answers and information. The bank began exerting pressure on the company for more insight into operations, financial results and future forecasts. The company responded in a knee jerk way providing the bank with unfiltered anecdotal information and incomplete financial reports. The bankers became confused which raised the already heightened concerns at the bank. They threatened moving the credit into its workout group and gave the company a limited amount of time to get its act together.

SBC SOLUTION

SBC was asked to assist in mending the bank relationship and manage the process of amending the credit agreement. Steve met with the lead bankers to understand their concerns and to begin the process of building confidence that the company was financially stable and that the credit was secure. The meeting was followed up by a comprehensive financial plan and communications strategy to bring further comfort to the bank. Steve took the lead role in the process, directly managed all communications between the company and the bank and over a period of several months successfully negotiated a forbearance agreement and subsequent credit agreement amendment. As a result of the lead taken by Steve, moving management to the background, and lowering the banks concerns while credit agreement negotiations were going on gave the company the breathing room to reassess their financial position and present an organized and credible plan to the bank. The company is currently generating growing profits and is in compliance with newly agreed financial covenants.