surviving the drought january 19, 2012 bill mcdermott-mcdermott financial solutions
TRANSCRIPT
SurvivingtheDrought
January 19, 2012Bill McDermott-McDermott Financial Solutions
Surviving the Drought
• How many of your clients are struggling with cash flow? • What sorts of issues are they having?
• How many of your clients have an active LOC?• How many have had their line decreased in last
12-18 months?• How many have had the bank restrict the terms
of their LOC?
Outline
• How to advise your clients that are experiencing cash flow issues when they come to you for help
• Do bank treasury management products play role in the solution?
• If so, which ones are helpful and why
• Are lines of credit to solve cash flow issues still available?
• If so, how do I advise my client where to find them?
How to Survive
Remote Deposit … • Bank from your desktop even your mobile phone
• Less trips to the bank saves time and expense
• 2 pm cutoff now extended to 5-6 pm
• Pick up at least 1 days sales in cash
ACH is short for………….• Automated Clearing House
• Predetermines settlement date of receipts and disbursements
• Improves your cash flow forecasting for that reason
• Eco-friendly alternative to checks and wires and the cost is about 25% vs paper
ACH does have credit risk
Banks have a two day delay in the settlement of some ACH items.
Be prepared to tell your client the bank may impose a file limit
It is likely the bank will ask for financial statements
Zero balance accounts…
• Interest rates on savings and money markets accounts are not worth fooling with
• However, your client may use this to reduce the line of credit on a daily basis
• Every $100,000 paid down equals $11.64 per day to your client assuming Prime plus 1
• You want to be sure the cost is outweighed by the benefit
Fraud prevention with Positive Pay…• In this current economy, white collar crime is up.
Lack of internal controls opens your client up to internal fraud issues
• Positive Pay is a tool where your client and the bank can reconcile a checks issued electronic file with a checks paid file on a daily basis
• Discrepancies are brought to management’s attention immediately
How about a line of credit? Any of your clients gone shopping? How many of your clients have gone shopping for a new
banker/banking relationship in the last 2-3 years? • What did they learn?
Is Your Client’s Bank on a Watch List?• Has it been sold or acquired in the
last 5 years?• Do you sense your client’s loan is in
a special assets category?
One of the best shortcuts to finding financing for your client’s business
• Find a bank that is profitable, has adequate capital and is either raising capital, paying back TARP money or both
• You can’t assume every bank is lending money just because their doors are open
• MOU, Consent orders and Cease and Desist orders are public records, just know where to look (Google search-bank name consent order)
• Google search/alerts, fdic.gov
If you find out your client’s bank has a health issue, then I would suggest having a back up plan. You want to help your client control their financial destiny, not put it in the hands of their bank/banker
Special situations and circumstances• 30 day payout-your client’s payout requirement in the
commitment letter may be enforced now vs. in the past
• Covenant default- your client may have accidentally tripped a debt to worth or cash flow covenant in their commitment letter
• Covenant defaults may now lead to forbearance agreements instead of being waived.
