Control Over Your Assets is Very Important Today

By | July 11, 2022

Over the years, I’ve spoken quite a bit about the restrictions that are common on almost all bank loans, and how they can really make things tough on a company. 

To refresh, the three I mention most are:

  • Blanket Liens – This is where the bank slaps a lien on your entire business, meaning you cannot do what you want with any of your assets. For example, if you finance a CNC machine with a bank, and a year later want to trade in your old delivery truck, guess what? That truck is part of the blanket lien. 
  • Minimum Balances – Most banks will require you to keep 80% of the loan amount in the bank, and will not let you go under that. This ties up a large amount of money that you cannot use.
  • Requalifying for the Loan Annually – Most banks will look at your finances annually and see if you still qualify for the loan. If they see a trouble spot (maybe a bad quarter) they can call in the entire loan immediately (and since they have 80% of the loan in their vault, collecting is easy.) 

The restrictions mentioned are limiting at any time, but in a slower economy, they can be extremely suffocating.

Imagine that instead of seeing your bank balance as reassuring, it’s only an illusion, because a solid chunk of it must stay in the account to cover bank loans.  

Or picture that maybe since times are slower, you wouldn’t mind privately selling a few older assets you aren’t using… but they have a lien on them, which kills any sale. 

Or still worse, imagine the economy slowing, and you have a bad quarter. It can happen to any business. So the bank calls you and says “we’re going to call in the entire loan now… we’ll be taking that 80% account. Do you have a few more dollars to settle it up today?”

Those might not be the exact words used, but trust me, this can and does happen. And it’s going to happen to companies in 2022. Sure, companies with millions in the bank can withstand this, but small businesses? Not so much.

Here in 2022, one of the smartest things you can do is not let anyone else have control over your assets. This is why the financing we offer can be so important – there are no restrictions. We have an understanding with our small and mid-size business customers: We do financing – you do you. It works for us, and it works exceptionally well for our customers. 

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