What is the biggest question on banker’s minds these days?

How will the companies they have lent money to hold up if their revenues fall 20%?  Will those companies survive?  Or will they miss covenants, struggle with cash flow and end up in the workout group?  Can the company make it through the current recession without becoming a problem case?

If you are out looking for bank financing now, take a closer look at your business plan.  The bank is going to take it and discount it 20%.   Save them the effort.  Be proactive.  Take your own cut at it.  Show them how you are going to be able to make it.  You can treat this as an alternate plan, one that you are prepared to put in action if your leading indicators show your revenues are going south.

What covenants are you most likely to trip?  What adjustments will you have to make in order to pull through?  Use this to help you think through the proposed covenant levels, to give yourself enough breathing room.

If you are not currently in the market for new bank financing, that is good news.  However, you are not on easy street either.  You still have the heat on- you have to make the covenants.  Now is no time to trip any covenants and be put on the street by your bank.

Go through the same exercise.  Do a version of your forecast with revenues down 20% and see how you hold up.  Where would you have to adjust to pull through?  Consider if you should take action sooner rather than later.  What costs could you cut now, without affecting your revenues and turning a downturn into a self-fulfilling prophesy?  Be proactive and take action sooner rather than later.  

Then show your banker how you are still able to survive on fewer revenues and still comply with your loan.  Be one less client that your banker has to worry about.  Let them focus their attention elsewhere.