Five Lessons About Banks- from Mistakes Millionaires Make

5 LESSONS

BANKS

about

Photo via Abacuswealth

Excerpts from Mistakes Millionaires Make, by Harry Clark

Take the Entrepreneurial Risk Assessment at: www.pathwaypartnersllc.com

http://www.pathwaypartnersllc.com/

My name is Harry Clark and I thought I had it made.

By 2004, I had:

founded two INC. 500 companies

450 employees

a $100 million net worth

BUT I LOST

EVERYTHING

NO

RESOURCES

I realized that there are

to help entrepreneurs avoid

common mistakes

ENTREPENEURS

That lead me to interview

30

CRASHED

that

spectacularly

CLIMBED

and

back up

SHARE

I want to

what I discovered

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A lot of entrepreneurs said that

bankers made doing business even more

DIFFICULT

5 KEY

BANKS about

Photo via Abacuswealth

These are POINTS

that I found out

#1

TRUST based relationship

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TRUST

The banker-client

relationship is a

based relationship

Photo via Deposit Photos

Although the banker does

his own due diligence,

he will still rely heavily on

YOUR

REPRESENTATIONS

Make sure you are

DON’T

OVERSELL

straightforward with

the bank and

them.

Photo via Thinkstock Photos

#2

SHAREHOLDERS

Bank’s loyalty


is to its

Be clear that the bank will always side with

its shareholders in a dispute,

deciding what’s best for itself

WITHOUT CONCERN

for the entrepreneur


#3

KILLING

May shoot themselves in the foot YOU


Photo via Business Insider

Many of us saw

example after

example

of banks making

STUPID

DECISIONS

during the

2008 Recession

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In a severe problem

banks often make

poor decisions that

often leave the

entrepreneur

with

NOTHING

#4

GUARANTEES

PERSONAL



Banks will always require personal guarantees

in order to have a “secondary source”

of repaying the loan


They are not required when the company

has other sources of capital, like

private equity or venture capital,

or

when the company has

significant assets on its

balance sheet

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The entrepreneur

usually gets

wiped out

of personal guarantees

ENFORCEMET

because of the


Therefore, he needs to be

CAUTIOUS and reduce or eliminate

personal guarantees

whenever possible

It is recommended that the personal guarantees have

CARVE OUTS

Photo via Wikimedia

Photo via Wikimedia

For example

If you want a $3 million loan and have

personal assets of $10 million,

the personal guarantees should only contain

$3 million in assets through specific carve outs.

#5

DEBT

LIMIT


Photo via Flickr

Credit availability is

CYCLICAL

There are times when it is cheap and abundant,

and times when it appears to evaporate completely.


When credit is inexpensive,

it is tempting

to take advantage and

through acquisitions or

OVER

LEVERAGE

OVER

EXPANSION


Several entrepreneurs

stated it as a lesson learned to

NOT DO IT

They ended up loosing their company

as a result of over-leveraging.

Learn more by reading my up-coming book

Or by taking the

Entrepreneurial Risk Assessment Survey at

http://pathwaypartnersllc.com/

Or by subscribing

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