This article will describe the physical and administrative problems of troubled businesses and some practical methods of reorganizing or selling them. Typically, the commercial lender's involvement with a troubled borrower begins with a telephone call. The founder asks for a meeting to discuss good news and bad news. The good news is that the founder has decided to have a candid discussion with the lender about the business problems that the founder had been working hard to hide. The bad news is that the company is in trouble and unable to pay its debts.
More good news is that the people responsible for the problems have been fired.
The founder is requesting a loan payment moratorium combined with increased funding to allow him or her to continue business as usual but to work out all of the problems. While rarely surprised at the extent of the problems, the commercial lender is usually dismayed at the business owner's simplistic view of their solutions. The lender must determine the viability of the founder's plans to reorganize or to sell the business. If the founder, attorneys, and creditors have committed themselves to a change, critical choices must be made. If the founder has lost all desire to risk and to work hard, the business should be sold.