Most, if not all, of the Bankruptcies that we see that could be successful Chapter 11 reorganizations are not so for one simple reason, the owners thought their banker was their friend. This is the result of months, if not years, of grooming done by the banker to make sure that the business continues trading its equity for liquidity through the bank.
The first thing everyone should remember is this: Banks DO NOT PROVIDE CAPITAL.
BANKS PROVIDE LIQUIDITY. BANKS BUY ASSETS ON THE CHEAP knowing that most people will do just about anything to avoid Bankruptcy.
Banks are not investors in your business. They trade something of yours, real estate, machinery, Accounts Receivable, Patents, or just your good name, for cash. If you don’t repay them, they get to keep whatever you put up, they get to take your collateral. If they don’t have collateral, they will take your good name. That’s why small businesses just can’t get credit in the name of the business alone. The banks want every lever they can get to make sure you will pay.
The second thing everyone should remember is this, Banks are public companies, they are bound by the law to comply with regulations, and they are required to act in their own best interests. All asking your banker to show you some grace does is humble you and embarrass the banker. They simply do not possess the power to be nice. You should not expect them to be so.
This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.