When a company starts delaying financial reporting, delaying vendor payments, struggling with cash flow, or defaulting on covenants the lender’s patience becomes a finite asset.
In distressed scenarios, it’s not just about surviving the crisis; it’s about presenting a credible path forward. And that’s exactly where many borrower-lender relationships break down.
At JACO Advisory Group, we’ve been on both sides of the table. Here’s what lenders are actually looking for during a debtor workout—and how companies can align to protect relationships, maintain access to capital, and regain control.
1. A Clear, Coherent Plan (Not Excuses)
Lenders are not interested in blame games. Whether the issue stemmed from market headwinds, operational missteps, or internal leadership gaps, they want to see:
- A diagnosis that’s fact-based and candid
- A realistic, time-bound plan to stabilize the business
- Defined levers for margin, working capital, and cash flow
Tip: A strong 13-week cash flow model with downside scenarios shows maturity, discipline, and readiness to execute.
2. Active, Capable Leadership
Lenders want confidence that someone is in charge. Someone with the experience and objectivity to lead under pressure.
That’s why one of the most effective steps a company can take is bringing in an independent, operationally-focused advisor or interim leader. This signals to lenders:
- You’re serious about the situation
- You’ve added capacity and expertise
- You’re not hoping for a miracle, you’re building a roadmap
At JACO, we’ve been brought in to assume interim CEO, COO, or CFO roles specifically to restore lender confidence.
3. Transparent, Regular Communication
Silence is a red flag. So is vague, inconsistent reporting.
During a workout, lenders expect:
- Weekly reporting on cash forecasting, variances to plan, borrowing bases, and milestones
- Immediate disclosure of new risks or disruptions
- A designated point of contact who’s responsive and informed
Consistent communication builds trust and optionality even when the numbers aren’t good—two things you desperately need in a workout.
4. Demonstrated Operational Progress
Plans are only as good as their traction. Lenders will be watching for signs that execution is underway, including:
- Vendor renegotiations or spend consolidation
- Inventory reductions and working capital wins
- Headcount or overhead adjustments
- Contract renegotiations or asset sales
If the balance sheet can’t be fixed immediately, prove you’re controlling what you can operationally.
5. Willingness to Face Hard Tradeoffs
Sometimes a successful workout requires restructuring debt, selling underperforming assets, or even replacing leadership.
Lenders respect borrowers who:
- Own the gravity of the situation
- Take accountability for outcomes
- Are willing to make tough calls for the business’ long-term viability
In many cases, we’ve helped clients preserve banking relationships by proactively initiating resets before the lender mandates them.
What Lenders Say After a JACO Workout
“JACO’s team has the ability to grasp important issues and filter out “noise” to quickly assess and address issues.”
The Bottom Line: Lenders Want a Partner, Not a Passenger
A workout doesn’t have to mean the end of a banking relationship. But it does require borrowers to step up, get real, and take aggressive action. Quickly.
At JACO, we specialize in helping middle market companies manage workouts with clarity, speed, and credibility.
Facing lender pressure? Let’s talk before time runs out.
