By Holly A. Magister, CPA, CFP®
Bankers and Entrepreneurs rarely see eye-to-eye. Recently, my observation of this unfortunate reality caused me to chuckle as I sat with one of my clients and her business banker. What made me laugh was how two extremely accomplished individuals could define the term “special assets” so differently.
Before I explain, I want to paint the whole picture for you.
My client has an incredible business employing more than 90 people. She started with three only seven years ago. And at that time, the bank let her borrow $50,000 after she and her husband signed a personal guarantee secured by the equity in their $140,000 home. That would also be the same home that my client and her husband reside and raise their three children in.
Over the years, this entrepreneur managed to bootstrap the business into a $19 million dollar business. And over those years, the bank stuck by my client, increasing the company line of credit to the multi-million dollar level.
In early 2008, life was incredibly good for this entrepreneur. Her home mortgage was paid off and receiving unsolicited offers to acquire her successful business was a common occurrence.
We all know what happened in late 2008 and like most, this business was hit very hard. Not hard enough to close the doors, however, hard enough to bleed red ink all over their otherwise pristine financial statements.
Even though this banker grew his relationship from a $50,000 signature loan to a $2.5 million dollar line of credit and the company average daily checking account balance exceeded $500,000, he was not happy. And his boss was not either.
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