Surviving The Drought

15
Surviving the Drought January 19, 2012 Bill McDermott-McDermott Financial Solutions

description

survive the financial drought using bank treasury management products

Transcript of Surviving The Drought

Page 1: Surviving The Drought

SurvivingtheDrought

January 19, 2012Bill McDermott-McDermott Financial Solutions

Page 2: Surviving The Drought

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?

Page 3: Surviving The Drought

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?

Page 4: Surviving The Drought

How to Survive

Page 5: Surviving The Drought

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

Page 6: Surviving The Drought

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

Page 7: Surviving The Drought

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

Page 8: Surviving The Drought

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

Page 9: Surviving The Drought

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

Page 10: Surviving The Drought

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?

Page 11: Surviving The Drought

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?

Page 12: Surviving The Drought

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

Page 13: Surviving The Drought

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

Page 14: Surviving The Drought

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.

Page 15: Surviving The Drought

Questions?www.bankingsolved.com

[email protected]@bankingsolved

678-597-8184

Bill McDermott