Negotiating for Solvency in a Time of Coronavirus—From A Creditor’s Point of View

As non-essential businesses are closing down across the country, customers are in short supply for a lot of businesses. This means that the businesses no longer have money to pay their suppliers, landlords, employees, etc. Yesterday I wrote about some excellent information I received regarding how to preserve your business and your assets when the customers are no longer there.

People are being creative. In my community, people are organizing to buy takeout from local restaurants and to buy from businesses that are still operating. By keeping some money flowing, there is more to pass up the chain. But as a creditor, whether to a consumer or a business, you can expect that that flow may become little more than a trickle.

The Dominos Toppling Effect

But even with community support, many businesses are going to suffer financial crises. I am a landlord, among other things. Over the weekend one of my tenants contacted me because his company is shutting down. Most landlords—as well as vendors and service provider with standing contracts—are going to encounter this situation as the shutdowns and quarantines continue. In fact, it will probably extend longer as businesses and individuals begin the process of recovery. It is nice to think that someone who can afford to lease a property to someone or sell goods and services on credit can survive without getting paid, but, if you are one of those landlords or creditors, you know that for most of us, this is not the case. When landlords and vendors don’t get paid, the money isn’t there to meet their obligations. And so on.

Good Banking Relationships Are Assets You Can Use

Cash flow is going to be critical. Although you are a creditor, you have your own obligations. A banker colleague shared today that your banking relationships are going to be a major asset. He warns that this is not the time to shop for new relationships, but rather to work the relationships you have. Bankers, like the rest of the business community, recognize the value of retaining good customers and not unnecessarily burning bridges. Your banker has resources that can help you weather this storm. Explore options such as

• postponing mortgage payments and adding them back at the end of the loan period,
• requesting interest reduction and/or higher limits in your lines of credit, and
• discovering how to apply for the SBA Disaster Relief programs now available.

Pass On Relief

A good tenant (or customer) in hand is much less expensive to maintain than finding a new tenant (or customer). And this current situation is nobody’s fault. An outstanding piece of advice that was shared with me was the beneficial effect of passing relief on. If we can get a concession from a lender or creditor, offer at least part of that windfall to those who owe us. Hoarding typically exacerbates shortages, Sharing reduces the burden for all. If we can be kind, listen to each other, and collaborate to find solutions, we will all get through this more easily.