Over the last 90 days, the banking community has gone through tremendous turmoil due to the loss in earnings from the sub-prime market, deterioration in stock price (some as much as 70% in the last 12 months), liquidity issues (unable to fund new loans) and full scale lay off of departments and key employees.

Every sector of the bank is feeling the pressure including the sector that makes loans to closely held businesses. In fact, banks are turning down loans today that they would have happily made 12 months ago and many business borrowers are finding that are being asking to find new financing, some are moved directly to the “work out department” (work out means down the road, loan paid off as fast as possible). One business owner I know was asked by his bank to leave because he had not met his financial forecasts over the last 24 months, although the business had never missed a payment and the borrower had nearly as much cash deposited in that bank as the size of the loan.

Word of caution. If your business has hit and miss profitability, losses this year or last, limited equity or high debt to worth ratio, it is time to get a plan in place to improve performance.  You could be on the list to be asked to leave and you will find that replacing your borrowing costs are going to be 2 or 3 times higher than it is today.