Roy H Park, Jr has published a new edition of Sons in the Shadow: Surviving The Family business as An SOB, a book about his business career including stints as CEO of Park Communications Inc. and Park Outdoor. He talks about how his father approached banks for financing:
“…Park laid and updated balance sheet that could be quickly and easily scanned on the adjacent coffee table. Then went on to explain the amount of the credit line he want to establish at the bank. He said that in his practice of cash acquisitions of businesses, he made it a condition to withhold 10% of the purchase price for at least a year – longer if he could persuade the seller – as a reserve against any claims for unforeseen liability. He wanted to protect himself from defending possible claims with his own money. Banker seemed to like that feature… Park did have an offer repeated advice for anyone dealing with the bank. Never surprise your banker. If you are in or foresee trouble with your account, tell your banker upfront. When the bank discovers bad news as a result of an audit or just plain snooping, it goes much harder. His final word was a good maxim: never tried to fool your banker. Give him hard facts and let him come to his own conclusions.”
Three important lessons here.
Know how much money you want when you approach an out of home lender.
Always approach your bank with a firm figure in mind for a loan. You will look thoughtful and prepared. And if your banker says, “how much money do you want?” never say “as much money as you can give me. Your banker won’t see the humor and if you are serious your banker will think you have no concept of risk.
Use a holdback for out of home acquisitions
Many companies (Link Media for one) withold a portion of an out of home acquisition purchase price for a period of time to be used to offset against any undeclared liabilities or plant issues. 10% may be hard to get. 3-5% may be possible.
Be timely with good and bad news.
Bankers have a saying: bad news is tardy, good news is prompt. You will gain major points for candor and trust if you share bad news promptly so as not to surprise y0ur banker. It also helps to share the steps you’ll take to mitigate the impact of the bad news at the same time that you deliver the bad news.
Sons in the Shadow: Surviving The Family business as An SOB is on sale at Amazon.
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