SME Loan restructuring through Loan Repayment planning

The present situation of economy is increasing non-performing loans in the banking industry maybe directly or directly related to the downturn in the Global economy. Basically, these problem loans are the result of the borrower’s inability to generate enough income to repay the loans. This inability may be due to management weakness, over-gearing, poor marketing, low productivity or sheer unresponsive to changes in the business environment. Whatever the reasons, timely diagnosis and treatment of these problem loans is paramount to prevent a disastrous outcome. The extent of any cure will depend upon the size of the problem, how quickly it is brought to light and the responsiveness of the business owner to act concertedly.


Lon restructuring is an specialist Job

The task of reviewing a problem account and considering practical remedial solutions is not for new-entrant to banking. The job is enormous as it normally entails identifying the cause(s) of the problem, procuring an accurate financial picture of the business and developing financial and strategic restructuring plans. Upon conceiving the “actual” situation in hand, the person in charge not only has to convince the bank to accept the plan but also need to convince the owners / management to act on the plan drawn

To be effective the person in charge, needs to recognize the importance of economic, market and other external factors. They also need to be a Financial Analysis, Consultant, Economist, Lawyer, Salesman, Beggar and Butcher!

Can All the Accounts Be Restructured / Rehabilitated?

To the hard pressed collection / recovery officer, restructuring is an exercise to defer classifying the delinquent accounts as non-performing and hopefully, the problem would resolve by itself. Unfortunately, this is not the case. As the saying goes, “what will happen, will happen”. Certainly, not all accounts can be rehabilitated. It is only borrower’s having the right “ingredient” and business that can be considered.

The Highlights of the repayment plan

At the end of the entrepreneur should able to supervise and follow up his distressed SME accounts more effectively by working closely with the bank.


It is important to learn

• Determine whether an account can be rehabilitate
• Determine the types of borrowers involved
• Understand and appreciating the financial predicament of distressed borrowers
• Determine the options available to the borrower in resolving the problem.

Following issues are extremely important to understand

• Loan structuring

- why is it so important
- how it can cause problems for the borrower
- what does it involve

• The role of a workout specialist

• Understanding and appreciating why good companies can turn bad
• Businesses do not fail overnight – spotting the tell-tale signs of trouble
• Determine the cause(s) of the problems(s)
• Options for businesses in difficulties
• Assessing the situation

o Conducting a situational audit of the business
o Is the business still viable?
o Is it worth saving?
o What is involved / required to make it work? What additional resources are required?
o Can the borrower do it?
o Should the bank do it?

• Structuring term lending
• Studying cash-flows to determine capacity to service interest / repay the loan
• Studying cash-flows to structure the repayment schedule
• Loan covenants and support - importance of - some types – structuring
• Drawing up action plan – monitoring progress – taking remedial actions
• Knowing when it doesn’t work!

Regularity on Business Planning

Some entrepreneurs, do modify there business plans on regular intervals . Some do not . There is an essential disadvantage of not modifying the business plan on regular intervals . One of them, is related to the validity of assumptions made in the plan . The Business plan need to be updated with the changing market scenario . Otherwise , it becomes a part of history .

Infact,I feel Business planning is a process . Once a person starts religiously following the process , he creates clarity in lot of avenues of Business . That clarity helps him to structure the plan in a better fashion , which could lead to better revenue outcome.

Business Plan written by Professionals for aspiring entreprenuers

There is a big doubt on the minds of aspiring entrepreneur, on the practice of recruiting a professional/consulting firm on writing their Business Plans. Most of the aspiring entrepreneur remains in a very excited stage, on the early days of business . This makes them think less of the requirements of the audience, of the business plan. In addition, they are more aligned to their emotional satisfaction and sometimes completely lost in their ego trip.

Obviously , these was hard for them, for sometime, when a person from the opposite side comes and starts dissecting their idea . Suddenly they feel lost of the entire excitement with realizing , the ground realities that a investor looks for .

However ,to me it looks like a stage where the business has start maturing from a seed stage to a sapling stage . The growth of the business brings more objectivity and these is something, an aspiring entrepreneur has to realize, early and not guard his idea in feverish emotional excitement.

I realize the Business Planning Event season has come, as the organization all around India are coming to me for with request for different role play on their business plan event starting from becoming a Judge to Mentor Business Plans .

I have already got the invitation to Judge the Business Plan Event of Indian Institute of Management , kolkata , known as i2i2009. I have been associated with i2i for some and other role, since its inception . But these time , Indian Institute of Management , Indore and National Entrepreneurship Network has invited me to mentor some of the Business Plan which has been selected in the Preliminary round of there Business Plan Competetion Sanjeevini.

Looking for a exciting time ahead with a bunch of aspiring entrepreneur . I had always a great interaction with them and there energy level remains very high ,in these seed stages of business.

Working with a Small Business Mentor - Do's Don'ts

There's more to an effective mentoring relationship than organized meetings. After mentoring a lot of entrepreneurs, I feel a lot of time , small business entrepreneur could not take the best from the mentor .

Mentor-Mentee relationship is a very ancient form of relationship, and has a tradition of knowledge sharing both in business and life . Following are do's and don't to get the best out of your mentor


Mentors are human being. They also fail . They don't let their fall to become a failure. That's why its important to take an interest in the person as a human being. I have an mentor who makes millions of dollars a year doing mentoring. After I ask my question I always ask him about what’s going on in his life, or share a joke or tell him something funny that’s happened to me.

Value the opinion of the mentor , even if you don't apply at later stage. If a value a opinion will learn from what you listen. Otherwise you will only listen and learn nothing.

Don’t try to wste a lot of your mentor's time at first. Connect in a way that’s quick and easy.

Be clear about what you’re doing and what you need. There is so much “dusty thinking” in the world. . Work on developing a clear elevator speech and mission statement. Think about one or two specific questions you need answered and think about your words and how to ask those questions clearly.

Listen, listen, listen

Thank the person for their time. Tell them what you’re going to do and then when you take action, be sure to let them know what you’re doing. Always, always, always tell them when you take an action step.

Reciprocate once in awhile. If you see a great article that you think he would enjoy – send it to him with a quick note. .

With mutual respect, demonstrated through action as well as attitude, your mentoring relationship can be mutually rewarding.