Five Years Without a Banking Relationship

Monday, November 2, 2015

It seems a bit like the distant past now, but the "scars" from "The Great Recession" run deep. Up until the recession, we had (or thought we had!) a great banking relationship. We always paid our mortgage payments each month, kept up with our line of credit, etc., etc. We never, ever got behind on anything...And the bottom fell out. As one of our Directors sagely said, "We were chasing the bottom for a long time." We'd go through a lay-off, and two months later repeat it all over again. Anyway, getting back to the situation with our bank: We had a certain amount of cash that we decided we could not go below a certain amount…So moving through the recession, we made our payments, commitments religiously, but the bank became "Strange." Almost immediately, they cut our substantial Line of Credit--several times. They finally decided that we didn't need a Line of Credit, but then came back to magnanimously give us a small line, but it was so restrictive that we'd have had to almost walk on water to meet the covenants. We opted not to have one at all! And they began to "threaten us"...Hinting that if we didn't meet or sustain certain EBBITA grading that "They could even ‘call the loan.’" Not one single word about how they could help us get through this difficult time.

The end of the story is we did survive....In spite of them!! (And of course they love us today.) Here's the reason I mention it, and what I took away from that experience. The bank had put us in a corner, and literally put us in a self-imposed fetal position. As I analyze all that went on, here's what I believe...They were in uncharted waters...They were running scared…Very Scared. These mostly young bankers were very inexperienced. At the end of the day, I'm convinced the last thing they wanted was to "own a lumber yard"...So all they could do was make threats!! And I fault myself...What I should have done, was been bold...very bold and very pro-active, very early on. Bold in demanding meetings to show them our plan in detail, on how we were going to survive. And if the frightened and experienced bankers that I was dealing with couldn't have found a way to "work with us,” I'd have demanded to talk to their boss...And if he/she, had no answer, I'd have gone higher...until I had run out people to talk to. (I did that one time with a large manufacturer till I got to the President/CEO, to then have a real audience.)

In this case, almost five years later, I did wind up having a meeting with several of these lower level bankers, and "Demanded" that their boss, the regional CEO, be a part of the meeting. This meeting lasted about two hours, and the CEO made copious notes as we talked…Surprise! About a week later we began to be treated like a real customer...But it took going over the other folk’s heads to get there. Valuable lesson learned. And if there is a future like what we went through again, my approach will be much more pro-active and aggressive early on...I won't allow them to drive our ship with threats when they obviously had no clue during the last recession--about real survival.

Now here’s my “funny story at the end” about the lighter side of our industry:

It was about t28 or so years ago. Bill Wersel, our truss plant manager, and I went to a jobsite to answer a complaint. Seemed the three- tab CertainTeed shingles we'd sold this Owner Builder were "defective"… (His words on the phone.) "I've got most of these d*** shingles down and my house is leaking like a sieve from these rains!!” What we saw when we got out to the jobsite I still find hard to believe. To begin with, he'd laid the shingles on the main roof--starting from the ridge, and working down!! I can't even imagine "slipping" the next run of shingles under the ones you'd just laid! And there was no felt laid underneath…As we looked at this, incredulously, he said, "Well that's bad, but my back porch is the worst...Leaking like I have no shingles at all!!" (We hadn't commented on the main roof yet.) The roof over the porch was dead pitch at all. No underlayment, and...yup! He'd laid shingles on the dead flat. He had one other "complaint"…Removing those pesky little degradable strips of cellophane stuck on the shingles back then, that kept stacked shingles from sticking to each other...He had painstakingly pulled every single one off. The ground, the plants, even the neighbor’s yard were littered with these little strips which everyone knew stayed on the shingle when you laid them. In the end we tried to explain to him, as diplomatically as we could, “The right way to lay shingles” plus the need for at least a 2-1/2 -12 pitch roof for them to even be under warranty. We finally walked off amid his rants and curses and "Promise of a lawsuit"...Never heard from him again...Just can't make these things up!! Anyone know of a way to fix "just plain stupid"?

Al E. Bavry, CEO, Kimal Lumber & Hardware 11/2/2015

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