• Rebecca Mendoza

Stressed by Workouts & Liquidations?

5 Tips to make Workout and Liquidation More Fun!


Okay, let’s be real: nothing about Workout and Liquidation is fun.


But that doesn’t mean it needs to be complicated or stressful.


Some of that stress is due to the anxiety the Borrower and its Principals are experiencing, and therefore inflicting on you, the Lender. And if you don’t have a dedicated collections or special assets department, or these Workout and Liquidation events happen infrequently, you may really be feeling the strain.


Here are five simple tips to help you work through the process.


1. Have a checklist and a set of procedures to guide your staff through the Workout phase of

the troubled debt. It should include everything the bank needs to analyze the situation, plus all items in the SOP 50 57 required by SBA.


2. Review your file for compliance with SBA. Make sure you have all the necessary

documents in case you have to move to Guaranty Purchase. And double-check to be sure those documents are current and compliant.


3. Schedule time sooner rather than later to meet with the client at their business location.

This accomplishes several things. First, you complete the required SBA Site Visit. Second, by scheduling ahead of time, you can send the client a list of items you’ll need (such as tax returns, current financials, and so on), thereby giving them plenty of time to collect it all. Finally, by meeting at their location and on their turf, you communicate your interest in them, and you reduce potential tension and defensiveness.


4. Leave the meeting with a clear understanding of expectations from the Client as well as

the Lender. Follow up with an email detailing those expectations as soon as you get back to the office. This may include a timeline of remaining information to be provided to Lender for analysis or presentation of options available to the Borrower.


5. Follow through with the analysis of the financials, current appraisals, credit reports, and l

lien searches. SBA requires that Workouts be supported with thorough and prudent analysis. The goal is to achieve full repayment of the loan, and not a quick band aid fix. Plus, if Workout is not an option, this analysis will support the choice to pursue legal action or abandonment of the collateral, as required by SBA when preparing your Litigation Plan or your Guaranty Purchase package.


Clear heads, calm voices, and understanding lead to results that benefit everyone.


Nonetheless, sometimes you’ll need to take a firm stance. Above all, be decisive. Too often we see Lenders unsure where to start or overwhelmed by volume, and then no action is taken. This only exacerbates an already bad situation.


Remember, too, that you can file a complaint or start a foreclosure without having to follow through. Sometimes that action alone will get your Borrower to the table to begin the Workout discussion.


Want some help getting through the SBA Workout and Liquidation process? We engage with your loan officers or collections staff to provide the tools and skills they need to bring about the best resolution possible. Reach out for a Free Consultation today!