Where Have All the Lenders Gone?

By John Ellsworth of Success Strategies


Recognizing the Value of Persistence

“Never, never, never give up.” Winston Churchill

In this first case, my Client was encouraged to pursue a new real estate loan with their lender. For six months, we worked on cash flow projections and had them reviewed by the bank before finally being turned down by the bank in October 2008. Their special assets division took over this lending relationship as a result of increased feed costs experienced in 2008 and reduced profitability in 2009. Imagine that…

Monthly inventories were now to be completed on a monthly basis, in spite of this client never having been out of compliance on their loan to value or any other loan covenants. We’ve since gone on to make steady improvement in both loan to value and cash flow the past two years, in spite of the decreases in milk prices in 2009.

Simultaneously, we have been able to reduce the Client’s accounts payable from a level of $650,000 to $225,000 recently, even as we experienced milk prices that ranged from $9.50- $14.50/cwt range.

Now, the treat of all treats was when we received a surprise inventory check-up with only 30 minutes notice. That’s never really been a problem. However, it’s ironic that the bank would do this on a Client that’s never been out of compliance with their loan to value. When we sent their May 2010 inventory report to one of their loan officers, we were hounded by another one of their loan officers two days later about not having received it. As a result, I simply took the same email with the attached inventory report and sent it to the second loan officer. We now send it to three people at the bank, so they always have enough copies in their files.

As a follow-up to that incident, the June 2010 inventory, which showed only 86% loan to value on the feed was readily criticized by the lenders, “They are really up against it on a loan to value basis.” These monthly inventory reports have shown to be an additional work load for both the Client and myself. However, I think it’s clear that we have shown that they were making progress, in spite of the lower milk prices in Quarter 2 of 2010.

The loan officers on this relationship claim that these monthly inventories, as opposed to the quarterly ones we’ve done for the last eight years, were musts. There is an acronym for this: MUSTS – Making Up Stuff To Scare Themselves. Hopefully, we will be able to move forward with this relationship, and either move them to a new level or to a new lender.

On another positive note, this Client has gone on to achieve excellent financial results in 2010. Through nine months, they have had profits approaching $300,000. Not bad for someone who was previously described as “over-leveraged and not likely to survive…?”


  1. As my business coach Dan Sullivan stated, “All progress begins with telling the truth.” In a nutshell, that is all we ever did, even with bankers who were determined to show us that we could not work through the challenges we faced.
  2. There is always a way to make things work out. We may not like every aspect of the changes necessary to reach our desired goal. However, there is still a way to clear the needed hurdles to success. This Client did not like some of the cost cutting that we were forced to do, but it worked. We were able to reduce their Total Cost per cwt by $3.00 during this time period.
  3. Improvements made now are an investment in the future. The cost cuts made above made it clear that greater levels of profitability were possible. Since they worked so well, why not continue them?


  1. Is someone telling you that you cannot make it? Never give up. I would encourage you to talk to others who understand your business and don’t be afraid to get a second opinion on this from another unbiased outsider. There is always a way!
  2. Like the Client described above, are there expense items or other “Sacred Cows” in your business that need to be changed or simply cut out? Be sure that you take a close look at these items and make the necessary changes. It may not be easy, but if it was easy, anyone could do it, not just successful people.