Plan B for High-Risk Banking Clients – October 6, 2020

At the onset of the pandemic, the Federal Reserve urged lenders to finance businesses affected by the economic downturn through the federal Paycheck Protection Plan (PPP), which paid out roughly $530 billion to businesses nationwide. PPP funds have since been disbursed and used. Concurrently, banks are tightening their lending standards, increasing the size of their special asset groups, and managing the quality of their portfolios. So what’s next for businesses that continue to struggle in the face of the coronavirus-related shutdowns? 

Traditional bank loans, based on the stability of a client’s cash flow, may no longer be an option for companies experiencing financial issues as a result of the pandemic. As we have seen too often during this economic crisis, many of America’s small businesses are facing the difficult decision of shutting their doors for good, should they be unable to secure an alternative source of funding. 

Whether you’re a bank lender, a CFO, CPA or financial advisor to businesses, do you have a backup plan or recommendation to help these businesses stay afloat amidst financial challenges? As you assess your client base and the next steps in your relationship, you may determine that it is time to transition your client to another funding source.  

 

Do You Have a Plan B for Your Clients? 

Allied Affiliated Funding, a division of Axiom Bank, N.A. may be a good option for you and your clients facing transition. Allied provides accounts receivables financing and asset-based lending to businesses of all sizes, from startups to businesses with $150 million in revenue. When the bank’s tight lending standards simply don’t fit the needs of a business, Allied can help. Here’s how. 

First, we want to acknowledge that bank exit conversations are difficult and uncomfortable for lenders and borrowers alike. We are committed to doing everything we can to be both helpful and encouraging to your clients. Here are a few things we will do for any clients you refer to Allied: 

  1. We will encourage your clients to keep their deposits with you by offering to waive our wire fees if it goes into a deposit account at your institution. 
  2. If an over-advance is required to meet the payoff amount, we will absolutely consider providing the short-fall amount to enable a successfulpaid-in-full exit for your institution. This is nothing new; we have done this numerous times over the years. 
  3. We make the transition back to your bank easy. Perhaps your client needs a year or so to strengthen their financial performance to meet your standards. We can provide them the working capital they need and then transition them back to you when the time is right.   
  4. We offer competitive pricing and our service is second to none. In these difficult times, we know just how essential these two factors can be in getting your clients healthy and back to traditional bank financing. 

 

Transitioning Your Clients to Allied 

We are absolutely committed to making this transition as smooth as possible. If you have a company in mind that may need to be transitioned from a traditional bank, give us a call. After speaking with you, our team will reach out to that company to gather information. We will then offer a proposal and individualized plan based on the needs of the company. Once closing documents are signed, Allied will issue the first funding to pay off any bank loans based on the availability of receivables.  

If your client is upside down with you on their line of credit, don’t let that stop you from making a referral to Allied. We may be able to provide an overadvance to cover the difference. 

There may also be a scenario in which the bank doesn’t wish to fully exit the relationship with their client but may be dealing with one or two troublesome receivables. If there is a specific receivable that is throwing off your risk rating, Allied can step in and create a carve out for that receivable, allowing you to maintain the relationship with your client. 

 

These are unique and challenging times for all, and we sincerely appreciate all that you do to help small businesses thrive, even in times of economic uncertainty. Small businesses are the heartbeat of America. Let’s work together to ensure these businesses are able to stay afloat during this economic downturn. By referring your clients to Allied, we can help you manage the delicate balance of maintaining your reputation as a lender or financial advisor dedicated to small businesses, while also limiting your portfolio’s risk.  

For more information, or to refer a company to Allied, contact us.