Today, Managing Partner John Geraci is discussing some of the conversations businesses might want to have with their lenders to help weather this difficult period. While everyone’s situation is different, knowing what your options are can help you make the best decisions for your business. Since no one knows how long their cash flow will be impacted at this point, the most important thing is to start these conversations now.
Hi, this is John Geraci, managing partner at LGA. Hope everyone’s doing well since governor Baker’s put in the stay at home advisory, and everyone’s staying safe and healthy. Just wanted to spend a couple of minutes and talk to you about some of the things that you can do with respect to potentially deferring certain obligations and payments to banks and financial institutions, as well as making sure that you have the available liquidity that you need in the form of bank and financial institution lending. So first just wanted to talk about some of the opportunities that banks are giving to their clients to actually freeze principal and interest payments on term debt and instead convert those, those notes to interest only for the time being. I think that’s a very smart and prudent thing to do for any business at this point where we’re not exactly sure how long our cash flows will be impacted by what’s going on with respect to COVID-19.
And it’s something that LGA has done with its bank as well, is convert our existing notes to interest only. So please reach out, talk to your banks and see if that’s an opportunity that exists for you. Something else that we wanted to make sure that you’re addressing with your banks is what their intentions are with respect to your line of credit. For those who have a working capital line of credit at this time, more companies are going to need higher access to liquidity and not lower. And sometimes when companies have historically not used the lines of credit during times like these, banks will actually pull back or lower the available funds that exist within those lines of credit. And I can tell you, uh, speaking from a prudent person’s perspective with respect to what we’re doing, we’re actually looking for our bank to increase our working capital line of credit to make sure that any customer payments that become delayed as a result of everything are mitigated by the fact that we have higher access to liquidity to continue to pay our teams.
So we think that it makes sense for all of you to reach out and make sure you understand what your bank’s intending to do with respect to your line and to the extent that you think you need additional borrowing capacity to help get through this. Obviously that assumes that you’re going to operate profitably and that this is merely a solution for cash-flow as opposed to profitability, then this is something that you might want to do to make sure that you’re putting yourself in a position to operate as seamlessly as possible throughout everything that we’re going through. So the FDIC is obviously encouraging banks to work with their customers and their clients. We’re not sure what other relief will come from the banking system, but it doesn’t hurt to make sure you’re being proactive with your banks and having these conversations and putting yourself in the best position possible to sort of address some of the unknown. So, we’re going to continue to keep you apprised of different developments as they become known to us, whether it be regulatory relief or anything else that comes to our attention with respect to how it will impact your business. So stay safe and healthy and we’ll talk to you guys soon.