'Our aim is to enable a business to survive'
If a business runs into financial or continuity difficulties, Rabobank often engages the Special Asset Management Department to assist them. This department is responsible for managing non-performing loans and recovery strategies. Our main aim is to help entrepreneurs through this difficult period and to bring about solutions. While this process usually turns out to be a success, closure or bankruptcy of a business cannot be prevented in some instances.
Rabobank has nearly 800,000 business customers. Of these customers, 200,000 have a business loan from the bank. Approximately two-thirds of these companies that have taken out business financing are intrinsically sound. Roughly 15% of these businesses require additional financial attention and receive this through their local Rabobank. The continuity of the businesses in this group is consequently not (yet) in danger.
Just under 25,000 of the 200,000 businesses that have a business loan are engaged in a special asset management process, which has been put in place to manage non-performing loans. This means that the continuity of just over 12% of the total number of businesses with a business loan is under threat to a greater or lesser degree.
'The businesses we work with are no longer financially healthy. So you can see us as a kind of business doctor,' says Frank Steenhuisen, Deputy Head of the Special Asset Management Department at Rabobank. 'Our main aim is to enable a business to survive. If the business has a good chance of recovery and has the capacity to return to a healthy financial situation within a reasonable period of time, then we focus entirely on that turnaround. But our duty of care as a bank also means we are sometimes required to protect business owners again themselves. In such instances we are strict and tough, but also honest and realistic.'
If the bank believes the business stands a chance of recovery, we then deploy a range of tools and instruments to help the customer. 'We can, for example, ease the interest and repayment obligations or provide a bridge credit facility. This often provides some breathing space and many businesses subsequently succeed in getting back on the right track,' says Steenhuisen.
Acquisition or restart
'But if there is no prospect of recovery, you must also accept the consequences with a view to the public interests. Sometimes a consultant or administrator can help enable an acquisition or partial restart, whereby the activities are continued in the interests of the customer, employees and suppliers.' Depending on the individual business situation and the outlook in the sector, Rabobank, in some cases, does not see sufficient prospects and determines that a financial solution is no longer feasible. 'That is an extremely painful moment and is the last thing you want to see happen. We consequently do not reach a decision of this magnitude overnight. It is preceded by a thorough process in consultation with the business owner.'
'We absolutely feel for our customers. We nevertheless have to have the courage to tell them the truth'
Figures versus emotions
The banks have regularly been criticised recently for supposedly 'pulling the plug on healthy businesses'. Frank Steenhuisen resolutely says this is not the case: 'That is not in anyone’s interest, not in the customer's interest, but clearly also not in the bank's interest. I nonetheless understand the emotions of a business owner who is fighting for his or her business. Sometimes there is no hope of a responsible recovery. We sometimes have to be the bearer of bad news and this does not make us popular as a department. It is, however, important to note that we do not handle our files solely based on the numbers. We also take the circumstances, the business’ historical track record, entrepreneurial qualities and other 'non-numerical qualities' into account. Many of the winding-down processes are steeped in emotions. It is extremely painful if someone has to see his or her business fall apart. And when faced with anger, frustration and sadness, it is very difficult to formulate in figures and facts how hopeless the situation is. We don’t expect the customer's understanding, but we do try to be rational.'
Putting on plasters
Steenhuisen points out that Rabobank must balance the different interests. 'Seeing customers in a difficult situation concerns us deeply. They have often been customers of the bank for years. But we cannot keep putting on plasters. At a certain point you must determine whether the road to recovery is feasible. And at those times we genuinely do not think only from the bank's perspective. After all, the money we lend them is not our own; it belongs to our savers or other capital providers. We also have a responsibility towards them. What's more: every euro we lend to a business without a future impedes the growth of healthy businesses.'
Back on the right track
The good news is that everything turns out well with most of the businesses that are under the guidance of the Special Asset Management Department at Rabobank. In many cases no additional measures are required and a business is completely back on track within a couple of years. A winding-down, acquisition or bankruptcy turns out to be unavoidable for approximately one-third of the businesses under special asset management. 'We are proud that we are able to help get most customers back on their feet. It is also not an easy role for our employees. We sometimes come across as being callous, but we absolutely feel for our customers. We nevertheless have to have the courage to tell them the truth. And unfortunately that sometimes hurts.'