Entrepreneurship & Small Business

Banker is Killing my business

  • Last Updated:
  • Apr 27th, 2011 5:18 am
Tags:
None
Newbie
Dec 12, 2010
1 posts
winnipeg

Banker is Killing my business

Hello , this is my 1st thread .
My brother and I are owners of a custom manufacturing business
( niche market - high quality team sportswear)
The business has been around since 1947.( 2nd generation)
We have endured many ups and downs .
Currently , our operating line is over the top , even though we met
with our banker a month in advance with cash flows , P.O.s from customers that we have insured with EDC.
to ask for a boost for 6 months ,
He came back with a minimal amount for only 2 weeks.
Yesterday , without notice several automatic payments were bounced from our account.
I know the bank has the right to do whatever they want , as per their small print in commitment letter ,
but I would think this move is bad for them as well as us , as it effects our ability to operate .
Of course a cash infusion would solve our situation , but we are cash poor .
I am just looking for any input .
We work too hard , to have it all threatened by a scared banker , additionally we have 25 employees etc...personal guarantees
15 replies
Deal Addict
Mar 8, 2009
1420 posts
109 upvotes
Inject some of your own personal money into the company or maybe issue bonds to your own employee's?
Regardless, your company needs to be restructured. The recession in Canada has long been over and the demand for team sports wear for kids is in high demand. Which makes me think something at your company is not being managed well.
Deal Addict
Dec 13, 2007
2032 posts
546 upvotes
Toronto
Andex wrote: Which makes me think something at your company is not being managed well.

That's my first impression. A company as mature as yours must have substantial buffer so as to not rely on loans or credit lines. Probably the bank thinks so to.

Go without salary for a couple of month, ask employees for loans. Yes, that would look desperate, and I probably would decline if asked by my employer, but who knows, perhaps you have good and trusting relationships with your employees.

You can also ask your customers for advance payments, say, in exchange for 10% discount.
Banned
Jul 8, 2009
4006 posts
127 upvotes
slavka012 wrote: That's my first impression. A company as mature as yours must have substantial buffer so as to not rely on loans or credit lines. Probably the bank thinks so to.

Go without salary for a couple of month, ask employees for loans. Yes, that would look desperate, and I probably would decline if asked by my employer, but who knows, perhaps you have good and trusting relationships with your employees.

You can also ask your customers for advance payments, say, in exchange for 10% discount.

Those are real bad suggestions, unlike America there is no real reason to stay with an employer who is borderline surviving in Canada
Banned
Jul 8, 2009
4006 posts
127 upvotes
59er1 wrote: Hello , this is my 1st thread .
My brother and I are owners of a custom manufacturing business
( niche market - high quality team sportswear)
The business has been around since 1947.( 2nd generation)
We have endured many ups and downs .
Currently , our operating line is over the top , even though we met
with our banker a month in advance with cash flows , P.O.s from customers that we have insured with EDC.
to ask for a boost for 6 months ,
He came back with a minimal amount for only 2 weeks.
Yesterday , without notice several automatic payments were bounced from our account.
I know the bank has the right to do whatever they want , as per their small print in commitment letter ,
but I would think this move is bad for them as well as us , as it effects our ability to operate .
Of course a cash infusion would solve our situation , but we are cash poor .
I am just looking for any input .
We work too hard , to have it all threatened by a scared banker , additionally we have 25 employees etc...personal guarantees

If you have sales orders then you should be able to borrow against them or sell them to the bank or another financial institution. The bank already knows how much money you have so by them bouncing checks in your account they are just trying to pressure you to come up with the money. What you need to do is go talk with your banker and determine how you 2 can work something out where they get paid and you do not go broke.


I really do not know if you are a bad manager. Being cash poor but order rich is a fairly typical problem because of the accural accounting system which could show your making money in January but by February 1st you have a zero balance in cash.

Your options are to borrow against/sell your orders if you need the cash very quickly, or wait for your cash to come in
Deal Fanatic
User avatar
Aug 19, 2001
5171 posts
116 upvotes
Vancouver
jungeon wrote: Those are real bad suggestions, unlike America there is no real reason to stay with an employer who is borderline surviving in Canada
Depends on the employee & the job??

I just hired 2 guys for about 60-70% what they would have made 3 years ago, and they're super grateful for the chance to work full time again.

jungeon wrote: Being cash poor but order rich is a fairly typical problem because of the accural accounting system
That's because of payment terms, not the accounting method. I have $50k in accounts receivable right now, that wouldn't change if i were using cash accounting!

...

I really wonder why the OP is blaming the bank for his troubles?? he's already maxed out his line of credit, and despite that, they STILL demand (and get) more credit?? Sounds like the bank is already going the extra mile for you.

After running this business for 65 years, your family ought to have a good idea of their seasonal cashflows. The problem here is you've spent money you don't have. Next year: learn to save up a little bit so you can get through your spring crunch.
Newbie
User avatar
Jan 30, 2011
91 posts
1 upvote
Nothing new. Unfortunately I assume that the killing business is their hobby.
Banned
Jul 8, 2009
4006 posts
127 upvotes
"
grant wrote: Depends on the employee & the job??

I just hired 2 guys for about 60-70% what they would have made 3 years ago, and they're super grateful for the chance to work full time again."

Right and if I am not getting paid I am not working for an employer and neither is any decent good employee unless your real good friends.

"That's because of payment terms, not the accounting method. I have $50k in accounts receivable right now, that wouldn't change if i were using cash accounting!"
Yes it would. Cash accounting system would basically recognize only cash in terms of cash on hand. Accural accounting would say you have more money, you would have a/r more and you have more net income.
...

I really wonder why the OP is blaming the bank for his troubles?? he's already maxed out his line of credit, and despite that, they STILL demand (and get) more credit?? Sounds like the bank is already going the extra mile for you.

After running this business for 65 years, your family ought to have a good idea of their seasonal cashflows. The problem here is you've spent money you don't have. Next year: learn to save up a little bit so you can get through your spring crunch.

Banks are the root of all evil, they destroy business for fun
Deal Addict
Jan 28, 2009
2013 posts
613 upvotes
Calgary
It sounds like you've already killed your business, the banker just doesn't want to throw good money after bad.

If you've been in business for that long, you should be able to anticipate seasonal demands and ensure you have sufficient cash to get you through the leaner times. You already have maxed your LOC and are still bleeding cash. You can't blame the banker for your inability to have positive cash flow.

Cut some employees, take a pay cut, canvass friends/family for investment. Do something other than whine and complain that someone doesn't want to lend more money to a company that is losing money.

Bankers are not your partners. They are trying to get the best return possible on the capital they lend out. It's not personal. If you want him to lend you more money, show that you are willing the make the necessary decisions to stay in business.
Jr. Member
Nov 5, 2010
107 posts
9 upvotes
Burlington
I am not in any kind of love with banks, they are overscharging for everything and anything they can, however they would be last place would blame for my failing business. It looks like OP run it to the ground and not taking any evasive actions on the way. We are not doing greatest for last 2-3 years as well. Sales is 1/2 what it was before US crisis but it is not banks fault. It is me, Internet, failing US dollar, increased competition, increased expenses, my appetite for more sales and chasing bigger and better deals that are not materializing. For my business that is!

Don't blame the bank
Deal Addict
User avatar
Dec 12, 2006
4360 posts
585 upvotes
Messed Up Area
dragons den ...hehehehhe

But seriously, if no cashflow management is not properly running. do you honestly require 25 employees? are you paying them general wages or high wages for skills?

I'd look at investors for 20-30% in company...
Deal Expert
May 17, 2008
15134 posts
160 upvotes
59er1 wrote: Hello , this is my 1st thread .
My brother and I are owners of a custom manufacturing business
( niche market - high quality team sportswear)
The business has been around since 1947.( 2nd generation)
We have endured many ups and downs .
Currently , our operating line is over the top , even though we met
with our banker a month in advance with cash flows , P.O.s from customers that we have insured with EDC.
to ask for a boost for 6 months ,
He came back with a minimal amount for only 2 weeks.
Yesterday , without notice several automatic payments were bounced from our account.
I know the bank has the right to do whatever they want , as per their small print in commitment letter ,
but I would think this move is bad for them as well as us , as it effects our ability to operate .
Of course a cash infusion would solve our situation , but we are cash poor .
I am just looking for any input .
We work too hard , to have it all threatened by a scared banker , additionally we have 25 employees etc...personal guarantees

In the end, they are not obligated to keep forking over more money when you ask for it. If they are no longer willing to put money in, you need to find money other places.

You may need to slash expenses anywhere possible, including layoffs. You can try to raise cash through other channels, including selling some of your business to an investor, selling assets, or taking out a loan from another source. In the end, an angle investor may be the most likely solution. If you have a family member or friend who may have enough cash laying around and trusts you, this may be the most likely source of money for you in this situation.
Deal Addict
Jan 5, 2006
1435 posts
127 upvotes
Midtown Toronto
You need equity / additional investors in your company, but that process needed to start months ago.

Your banker is worried that you will be entering into receivership soon, and as others have alluded to, you need to be looking at all your options at this point.
Newbie
User avatar
Jan 30, 2011
77 posts
2 upvotes
Vancouver
Welcome on RFD forum with the first "positive" thread. ;)
Deal Addict
Mar 12, 2004
1918 posts
1298 upvotes
Toronto, ON
You should never expect banks to fund your 100% receivables and inventories....
75% receivables + 50% good inventories is the common bechmark in biz banking. You are expected to fund the rest using your OWN cash flow.

And others are right - you are the one killing your business. act fast for some restructing and re-capitalizing, before it is too late.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)