Accounts Payable
conversion to Note, 100-101
special pay considerations, 147-148
Accounts Receivable
aging, 168
collection period, 38
conversion to note 37, 168
discount, 169
eligibility, 169
insurance, 168
lender's notification, 168-139, 142
Seasonal, 169
slow pay, 227
Alternative Lenders, See Lenders
Appraisals
equipment, 59-60, 171
inventory, 170
loan-to-value, 60
real estate, 62
requirements, 59
updates, 59, 332
Approval Authorities, 76, 333
Asset-Based Lending ("ABL")
accounts receivable, inventory, 167, 227-228
advance rates, 180
audit fees, 107-108
audit frequency, 108
audit preparation, 235-327
audit types, 223, 235
borrowing base certificate, 231-234
depository accounts, 191
eligibility, 167, 169
financing overview, 222-225, 344-345
formulas for lending, 180
increasing lender’s value, 167-169
reporting requirements, 191
transfer to ABL Department, 58
Attorney See Legal Counsel
Balance Sheet
components, 15
Bank
accounts, 55, 191, 331
offsets to 139, 143-144, 338
closings, mergers, acquisitions, 77-81
lock boxes, 114, 346
regulator's impact, 80-81
stability ratings, 196
traditional lenders, 261-263
Board of Directors
formal, 307, 351-352
advisory, 303, 351-352
Bonded Warehouse
inventory control, 57-58
Brokers (Loan)
broker fees, 111, 278-279, 336
services, 195, 278-279, 336
engagement considerations, 195
process, 274-280
"Cap-Ex" Line
definition, 185
Cash Flow
acceleration of receivables, 145-146
account offsets, 139, 143-144, 338
accounts receivable, post-possession, 145-146
account diversification, 55, 331
short term sources, 145-148
utilize other banks, 55
Cash Flow Statement
components, 15
Closings (See Loans)
Collateral. Also see specific collateral items.
additional collateral
request for, 331-332, 341
availability work sheet, 176-179, 341
enhancements, 55-56, 167-175, 331
double pledging, 27, 99-100
lender's second position, 173
Collection Days (see Fees)
Commercial Finance Association ("CFA")
contact, 269
the organization, 269-270
membership, types of lenders, 269
Commitment Letter
confidentiality, 196
evaluating, 209-216
description, 135
fee, 109
Covenants (see Loan Covenants)
Credit Committee
participants, 118-119
process, 88
Credit Inquiries, 198-199
Credit Unions
general, 261, 279, 349
loan offerings, 271-272
membership qualifiers, 271
Debt-to-Worth Ratio, 38
Debt Layers, Strips & Hurdles, 282-284
Debtor-in-Possession ("DIP")
overview, 257-258, 345
Default, see Loan Default.
Demand Notes, 4-5
Deposits, required. see fees.
Emergency Procedures
responsibilities, 126
30 day letter, 125
key meetings, 128
lst meeting, one-on-one, 128-130
2nd meeting, borrower / professionals, 130-132
3rd meeting, full cast, 132-133
Employee Stock Ownership ("ESOP")
overview, 255-257, 345
Environmental
concerns, 81-84
lenders’ risk insurance, 83, 333
remediation, 83, 85
side letter, 85-86
site assessment, 81-82, 333
Executive Summary
overview, 317-318
recap, 353-354
Export-Import Bank ("Ex-Im Bank")
description, 273
Factoring
costs, 243
description, 238-240, 346
maturity 243
non-recourse, 242
process, 241
recourse, 242
"spot", 243
Fees
application, 106
audit, 107-108
broker, 111
challenging of, 334
collection days, 112, 334
commitment, 100, 334
duplication, 335
forbearance, 63-64, 115, 332, 334
good faith deposits, 109
legal, 111-112
lender, 11-12, 328
loan origination, 110
loan closing, 110
loan prepayment, 115, 187, 335
lock box, 114
non-usage, 113-114
public reports, 108
real estate, 117
Financial Manger’s Watch List, 327
Financial Management
Relationship Techniques
current lender, 161
overview. 287-289, 350
tactics, 290-299
tickler file, 351
Financial Package
appendix for plan, 322
business plan, 315-316
components of business plan, 316-323
executive summary, 317-318, 353-354
outline, 312
requirements for, 311--323
table of contents for package, 314-315
Financial Statements
assumptions, 21
audited, certified, 17
cash flow, See Cash Flow
comparative, 16
compilation, 16
forecasts, 20, 328
notes, 15
opinion, 17
reliability, 14
reviewed, 17
types, 15, 327-328
See also Balance Sheet,
Income Statement,
Cash Flow Statement.
Financing
asset-based, 222
bridge, 200
"CapEx" line, 185
debtor-in-possession (DIP), 257-258, 345
employee stock ownership plan, 255-257, 345
factoring, 238-240, 346
mezzanine, 200, 247-249
purchase order, 244-247
small business administration, 240-253
stages, segmentation, 199-200
state and municipal, 254
Financing Statement ("UCC")
UCC-1, 8-9
UCC Search, 8-9, 329
Forecasts See Financial Statements
Funds
alternative depositories, 55
funds flow See Cash Flow
Gaining Time
after 30 day letter, 128-134
continuing process, 43-44
strategic delays, 332
Guarantees
additional, 174
benchmarks, 90, 336-337
deficiency, 92
joint and several, 90
limited, 90, 337
loan guarantee programs, 197
personal, 56, 89-94, 331, 336
collateralization, 56, 331
personal options, 89
overview, 89-94
Small Business Administration, 249
suppliers’ and customers’, 57
time, 91
unlimited, 89
validity of collateral, 92-336
within Borrower’s T&C, 187
Income Statement
comparative, 16
components, 15
Interest Rates
360-365 day calculations, 101-102
caps and collars, 104-105
definition, process, 101
fixed, 102
increases, 58-59
interest only, 103, 186, 335
prime interest rate, 103
LIBOR, 103
prepaid, 117
variable, 102
Industry
comparative ratios, 164
recommendations, 74-76
lending specialists, 198
stigmas, 73, 332
Internet Loan Sourcing
overview, 274
Insurance
assignment of life, 174
key man, 95-98, 335-336
within Borrower’s T&C, 188
Inventory
advance rate, 126230
appraisals, 170
bonded warehouses, 57-58
caps, 178, 214
inventory lending, 228-230
lines of credit, 213
values, 169-171
Insurance
key man, 95-98, 335-336
loss payee, 96
Legal Counsel
controlled communications, 68
necessity for, 154, 337-338
tactical planning, 43, 154-155, 337-338
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Legal Fees
cap, 112, 336
responsibilities for, 111
Lender (or Lender’s)
acquisition of a lender, 233
alternative lenders, 263, 348
locating alternative lenders, 269
communications, 328
deemed insecure, 51
leveraging, 51, 216-218, 342
liability, 28
loss of trust, 51-53
return on loaned funds, 11-13
negotiating, 218
overview, packaging for, 201, 342-343
put to the test, 260-207
rights and remedies 141-143
selection, 192, 342
stability, 196
traditional, 261, 348
Letters
30-day notice, 125-128, 338-339
30-day expiration, 137
covenant violations, 42
environmental side letter, 85-86
Letter Agreements
bail out, 46-47
environmental, 85-86
Leverage Buyouts
financing, 230, 346-347
Loan (or Loans)
approvals, 76-77, 118-121
authorities, 76-77
availability worksheet 176-179, 341-342
closing costs, 9-12, 101
defer closing costs, 328-329
payoff discounting, 175
proceeds, use of, 9-10
recovery, 66
restructuring, 41-43, 330
Loan Covenants
charges of violations, 39-40
compliance, 22-23
default provisions, 189
financial, 23,164
loan-to-value, 60
non-financial 22-23, 163
others, 28, 106
red flags, 36, 189
step-up agreement, 174
tailoring borrower’s covenants, 163
tightening of, 54, 331
violations / solutions, 37, 39, 43, 46, 329
Loan Default
general, 63-64
lender’s rights and remedies, 27, 141
lender deems itself insecure, 27, 51
Loan Officers
accessibility, 35
assignments, 33
authority, 14
effecting change of, 157-158, 340
position, 31
Loan Proceeds
loan recovery, 66
utilization, 9-11
Loan Repayment
favorable schedules, 186, 327
timely payments, 9, 299
Loan and Security Agreement
contents, 7
Loan Workout
loan transfer to, 65-69, 148, 332
overview, 65-69, 148-154
recovery mission, 149-150
relationship, 150-152, 340
seasoned officers, 150
Lock Box
asset-based lending, 225, 346
customer payments (ABL), 58
fees, 114
Machinery and Equipment
maximizing advances against, 171
appraisals, 61-62
Management Team
overview, 303
profile, 352
temporary (contract) management 304, 352
value of effective management, 303, 352
succession management, 306, 353
Meetings
agenda for 3rd action meeting, 133
gaining time, a process, 43-44
initial lender’s meeting, 202-207
lenders’ perspective, 204
loan workout, 151
three action meetings to gain time, 128-133
Mezzanine Lending
description, 247-249, 347
priority position, 283-284
Mortgage
notes, 6
appraisals, 62-63
within terms and conditions, 135
collateral within terms and
conditions, 182, 188
Net Worth
minimum, 37-38
Notes
accountant’s on financial statements, 15
taking of notes, 129, 141, 338
promissory note types, 4-7
Officers (Officer’s) Also see Loan Officers
loans to officers, 166-167
loans cited within Terms and Conditions, 167
salary, restrictive covenants, 166
Offsets to bank accounts, 139, 143-144, 338
Participations (Loan)
overview, 280-282, 349
Performance
lender’s expectations, 9, 36
Pledging (collateral)
additional assets, 57, 331
Possession
borrower’s actions, 138-141
employees’ meeting, 140
key parties’ notification, 141, 339
lender at business site, 137
lender’s rights and remedies, 141-143
operating accounts, 142, 331, 338
process, 141-145, 339-340
Prepayment Penalty
at closing, 115, 187, 325
within Terms & Conditions, 187
Press Kit, 353
Promissory Notes
definition, 3-4
types, 4-7
Proposal Letter
comparative analysis, 209-216, 343
definition, 135-136
evaluating, 207-216
Purchase Money Security Interest
benefits to borrower, 101, 337
initiated by supplier, 99, 337
overview, 98-101
Purchase Order Financing
description, 244-245
process, 245-247
product of alternative lenders, 264
sourcing alternative lenders, 269-270
Purchase and Sale Agreement
See Environmental Concerns
subject to clause, 333-334
Ratios
cost of sales / inventory, 24, 39
current, 24, 37
days receivables outstanding, 24, 38
debt-to-worth, 24, 37, 38
financial coverage, 25
leverage, 24
liquidity, 24
loan-to-value, 60
negotiations, 330
quick, 24
sales / accounts receivable, 24
within Terms & Conditions, 180
Real Estate
appraisals, 62-63, 171
line of credit, 215
priority position, 283
purchase and sale agreement, 333-334
Red Flags, See also Loan Covenants
pertaining to financial ratios, 36, 189
Relationship Management, 287-289, 350, 344
techniques, 290
Remediation
environmental, 81-86
Reporting Requirements
unmanageable, 40-41, 330
Rights and Remedies
lender, 141
Risk Ratings
overview, 45, 330-331
schedule, 46
new lender changes, 79
Small Business Administration ("SBA")
"504" program, 252
"7(a) guaranty program), 250
contact, 270
lenders, 251
"LowDoc" loans, 189
overview 249-253, 347-348
process, 251-252
Security Interest
against assets, 27-28
lender filings, 8
purchase money interests, 98
Senior Secured Lender
description, 281-282
Special Assets, See Workout Department.
State and Municipal Financing
Location sources, 272, 347
offerings, 254
Subordinated Debt
priority position, 283
overview, 94-95, 337
strengthen ratios, 95, 337
within Terms and Conditions, 188-189
Succession Management, 303-307, 353
Technology Capital
overview, 273, 347
Tactics, See meetings.
action meetings to gain time, 128-133
bail out, 46-47
change lending officer, 157-158
deteriorating situation, 156-157
gaining time, a process, 43-45
lender selection, 192-199
prospective lender’s meeting, 204-207
prospective lenders to the test, 200-207
when in loan workout, 65-69
with borrower’s legal counsel, 154-155
Terms and Conditions ("T&C")
borrower’s T&C, 179-192, 341, 343
needs worksheet, 176-179
sample 180-192
Term Notes. See also Notes.
structure, 4
Term Sheet
explanation, 134
evaluation term sheet or proposal, 207-216
Timing
borrower requirements, 68-69
delaying tactics, 332,338,344
evaluating proposals
response date, 213
lender’s requests, 63
lender calls loan, 125-128
Turnaround Management Association
("TMA") overview, 273
Uniform Commercial Code ("UCC")
copies, 329
overview, 8
records check, 329
releases, 8
U. S. Small Business Administration ("SBA")
overview 249-254, 347-348
Watch List
for financial management, 327-354
Workout Department, a/k/a Special Assets
abiding by covenants, 156
legal counsel involvement, 154-156
purpose, 65
relationship to maintain, 67-69
transfer to, 65, 148
Worksheet (determine needs)
considerations, 176
sample, 176-179
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