AmiSight 7/2: The Six Stages of Borrower Denial

Last month, I received a call that should have come nearly two years earlier. A long-established borrower with solid collateral spent 21 months in a workout with a major multinational bank but never developed a meaningful turnaround plan. When the borrower finally contacted me asking for financing or banking alternatives, I had good news and difficult news.

The good news: financing solutions were still available, though they had gotten more expensive. The difficult news: because there was still no turnaround plan—no document explaining past issues, corrective actions, or why the business should be seen differently now—we couldn't take the opportunity to the lending market; a borrower's collateral means little if they cannot explain their situation in a coherent manner with a plan to move forward that a lender would understand and buy into.

Borrowers in financial distress follow predictable stages of denial. The details change, but the pattern is consistent. Meanwhile, the lending market moves on, options vanish, and borrowers adjust to reality. Head over to my 21Hats column to continue reading.

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