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Who Protects Your Assets? Lenders Want To Know

      When that happens, words such as "dead in the water" and "immediate liquidation" come to mind . . . and the images they conjure of all that you've built over the years crashing around you aren't pretty. A large manufacturing firm was recently embroiled in this exact situation. Their solution was to seek out a qualified CFO to help them through the lending crisis, and they found their answer with Growth CFO Group.


A line of credit for a firm with annual revenues around $100 million was up for renewal. The firm contacted its lender and both parties agreed to move from a traditional commercial loan to an asset-based loan (lending against the company's receivables and inventory).

Now, working with lenders these days is much more stringent than it was during the 1990s and earlier this decade. We seem to be re-experiencing the climate of the 1970s and 1980s, where credit was available for qualified borrowers but accessing it meant you had to prove you were a low risk.

In this case, the bank initiated due diligence to ensure the company's physical inventory and receivables existed, as well as conducted background checks on the company's senior team. After all, the bank wanted to be certain the company's assets were protected and it finances were being managed properly.


What should have been a slam-dunk, became anything but. While the company's inventories and receivables checked out, the bank discovered inconsistencies with the company's financial management.

Early on in its due diligence, the bank notified the company that it was not going to lend the money. Their had found improprieties in the way the company's finances were being handled by the full-time CFO, plus it had discovered this individual had engaged in previous criminal activity (something the company had not uncovered when it had hired the CFO several years before). In short, the bank would not lend the company money because it felt the company's "cash was at risk."

Faced with an end to its line of credit, the company was suddenly in a difficult situation with a very uncertain future. They terminated the CFO and immediately began to look for alternatives.

At the recommendation of the bank, Growth CFO Group was interviewed.


Growth CFO Group was among a handful of possibilities considered by the company to help remedy the situation. Ultimately, Growth CFO Group was selected because, according to the company, principal Edward Zack was a good listener with excellent communication skills who demonstrated an immediate grasp of the issues at hand and what needed to be done. Plus, as an interim, part-time CFO, Ed provided the flexibility and affordability the company so desperately needed.

As a way to rekindle trust and to show the company was working in good faith, Growth CFO Group's immediate first step was to declare that everything the company was doing to correct its financial issues would be made transparent to the bank.

The bank granted an extension to the current line of credit, which meant the company could keep its doors open and give Growth CFO Group time to put the company's financial house in order. During this period Growth CFO Group conducted financial forensic work to discover everything there was to know about the company's assets, its holdings, and how its finances had been managed and how that would have to change going forward. Throughout, acting as the company's CFO and a member of its senior team, Growth CFO Group shared its findings and corrective action plans with the bank, keeping the lender in the loop, repairing the relationship.

In May, the company re-applied for financing, and by July it had a new, expanded, three-year line of credit in hand.


Bucking economic trends, especially in the manufacturing sector, this company continues to grow, almost doubling sales in the last year. Having gone from an ex-CFO who didn't do the job to one who does (Growth CFO Group), has made a world of difference in terms of the company's relationship with the bank as well as its ability to control and manage all aspects of money matters affecting thebusiness.

The lesson learned was difficult and risky. Admittedly, the owners did not have financial expertise, so they needed a CFO capable of big picture thinking, someone who could help protect and grow the business. Instead, they had a person who liked to process transactions, run the accounting department, and who did not implement the controls necessary (whether intentionally or not is debatable) to protect company assets.

Working with Growth CFO Group as its permanent, part-time CFO this company is now confident that its banking relationships are properly managed, that key financial controls are in place, and that financial functions work in sync with operations and sales, rather than in opposition. Working with Growth CFO Group, this company has gained a qualified, capable business partner and strategic thinker who can both help grow the business and manage the company's day-to-day financial operations-and it's done so by hiring the CFO skills it needs in the most cost effective manner possible.

Article Source:

Karen L. Monsen is a freelance writer living in Utah. She also writes for Laurie Pehar Borsh PR - a social|digital|web|traditional PR firm in Los Angeles, CA.

Posted on 2011-06-18, By: *

* Click on the author's name to view their profile and articles!!!

Note: The content of this article solely conveys the opinion of its author,

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