When Your Loan Goes to the Workout Team

Your file has moved from the relationship team to a specialist one. Banks call it different things — workout, business support, special assets, credit restructuring, intensive care — and the move usually follows something specific: a covenant breach, a missed payment, a set of accounts that changed the picture, or a pattern the bank had been watching for some time. It is not enforcement. It is a change of question, and Problem Loans and Workout explains why banks make it: the people who made a loan are the least well placed to judge it once it is in trouble, and the skills needed now are different.

The objective has changed too. Your relationship manager's job was to grow a profitable customer; the workout team's job is to recover the bank's money. For a business that is still viable those usually point the same way — a trading business is worth more than its assets sold one by one — which is why most workouts try to keep the business going. But the conversation is no longer about the next facility. It is about the plan, the evidence for it, and whether the people presenting it can be relied on.

The reservation of rights alarms most borrowers and says less than it seems: it records the default so that carrying on normally cannot later be read as the bank waiving it. The information request says more. A cash forecast week by week, usually for thirteen weeks, is the document the whole workout will run on, because the question has become whether the business can pay its way from here, not whether last year was good. The changes to the facility are the ones your facility letter already allowed — which is the moment to reread it, with an adviser, before replying to anything.

The workout banker is not your relationship manager with a sterner manner. They have seen more businesses in difficulty than you have, they have no stake in the original decision, and they will read your file for three things: whether the business is viable, whether the plan is credible, and whether the information they are getting is complete and on time. The third is the one you control entirely, and it decides more than borrowers expect. A workout banker who is surprised twice stops believing the forecast, and a forecast nobody believes cannot buy time.

So give them one point of contact, on your side, who answers on the day. Send what they ask for when they ask, and say so when you cannot. Tell them bad news before it appears in the numbers — the lost customer, the tax arrears, the supplier who has put you on stop. Your relationship manager may still be in the building and may still be sympathetic, but they are no longer the one deciding, and going around the workout team to them is read as exactly what it is.

The bank may ask an accounting firm to review the business before it decides what to back. The reviewer looks at whether the business is viable, whether the cash forecast holds up, how much the bank's security would realise, and sometimes at management — whether the people running the business are the people to run the recovery. It is the bank's review, of your business, and its conclusions will shape everything after it.

Three things to settle before it starts. Who pays — many facility agreements let the bank recover the cost from the borrower, and in some markets a banking code changes that for smaller businesses; ask, in writing. What the reviewer has been asked to do — the scope decides the report. Whether you will see the conclusions, so you can correct errors of fact before they harden into the bank's view. Then cooperate fully: give access, answer quickly, and treat the reviewer as the person whose report your plan has to survive — because it is. A plan that has already been tested by your own adviser survives better.

A standstill is an agreement by the bank — and by other lenders, if there are any — not to demand repayment or enforce for a set period while the position is worked out. It buys you time on terms, and the terms are worth reading as carefully as the time. Expect to agree to report weekly or monthly, to meet dated milestones — a revised plan, an asset sale, a refinancing offer, new money from the owners — and not to do anything that worsens the lenders' position: no new debt or security, no dividends, no payments to related parties, no disposals outside the ordinary course. There is often a fee.

The default does not go away during a standstill; the bank simply agrees not to act on it for a while. When the period ends, its rights return in full unless something has changed. That makes the milestones the real document: each one met is evidence that the plan and the people are credible, and each one missed makes the next extension harder to get. Agree milestones you can meet rather than ones that sound like the plan you wish you had.

What chooses between them is what each would recover for the bank, set honestly beside the chance it works — the arithmetic the workout guide sets out. A viable business with a credible plan is usually given the chance to run it, because a plan that works recovers more than a sale today. What makes a plan credible is not its ambition but its evidence and the record of the people presenting it. If the plan is a refinance, read Bank Loan vs Private Credit first: the lenders who take these files price for the position, and a dearer loan that does not fix the cash flow only moves the problem.

If you signed a personal guarantee, it has just come into view. The workout team will usually ask for a statement of the guarantor's own assets and liabilities early — not because it intends to call the guarantee first, but because it is working out what each way out would recover, and the guarantee is part of that sum. The same goes for the security the bank holds: it will check that it is properly registered and what it would realise.

This is the point to take your own advice, separately from the company's: an accountant, a lawyer, and for a serious position a restructuring adviser. Directors' legal duties sharpen as a company nears insolvency, and the rules differ by country, so the page will not pretend to set them out. What it can say is what every adviser will say first: do not move assets out of the business, do not pay connected parties ahead of other creditors, keep proper records of what was decided and why, and do not sign anything new with the bank until someone on your side has read it.

What helps: raising the problem before the bank does, which is what the businesses that come through a workout most often have in common; your own weekly cash forecast, sent before it is asked for; a plan that names what has already been done, not only what will be; owners putting something in, even a little, because it shows who carries the risk; milestones met; and bad news told early. What hurts: silence; forecasts that miss by the same margin every month; going around the workout banker; payments to connected parties; optimism presented as a plan; and treating the standstill as a holiday rather than the deadline it is. The bank is reading the same things it reads on a monthly pack in good times — punctuality, candour, forecast against actual — with far more depending on them.

Most businesses that come through a workout are the ones whose owners treated it as a negotiation about evidence rather than a fight or a confession. The bank wants its money back, and in most cases the cheapest way to get it is for your business to survive. Help it see how.