Before You Need a Lifeline, Build the Bridge
Why cultivating financial relationships in calm waters can save you in the storm.
Dear Fabulous Female Founders,
Last week I wrote about the abrupt cancellation of my firm’s maxed out $2 million credit line at a critical moment in our history. I shared this story in the context of ways to finance growth, such as debt, equity, crowdfunding, grants, and other forms of non-dilutive capital. (Read it here.)
With my consulting firm Alta Planning + Design, my partners and I largely bootstrapped, reinvesting profits in growth. My bike share firm Alta Bicycle Share took it up a notch, securing a large bank loan to finance the Citi Bike launch, with repayment to come from a sponsorship deal. Together, these two firms also tapped the aforementioned $2 million Wells Fargo credit line backed by personal guarantees.
Now let me tell you about the reaction of our longtime banking rep, Barbara, when I called her to beg for more time.
We’d been with Wells Fargo since our company’s humble beginnings, back when consulting firm Alta Planning + Design was one of business partner Michael’s personal accounts. When we moved our headquarters to Portland, I separated Alta’s accounts and forged a relationship with Wells’ Barbara, a fellow ex-Texan with a strong lingering drawl, perfectly coiffed brown hair, and penchant for simple, elegant pantsuits. To me, she was warm, sharp, strong, stylish, funny, and competent, redolent of Texas politicians Ann Richards and Kay Bailey Hutchinson.
Over the years, Wells increased our credit line many times as Alta grew to 100+ employees spread around the country in a dozen offices, and again after we launched Alta Bicycle Share. All that time, we dipped in and out of the credit line and always paid it off quickly. Annually, Barbara would check in with me, analyze our profit and loss statements and balance sheet, and review our Personal Finance Statements.
We’d passed all the tests, every year.
Until the moment we flunked.
Between the mess that ensued as we prepared to launch Citi Bike—the software debacle, delays, and Superstorm Sandy wiping out our equipment—and Alta’s normal course of business, including rapid expansion and year-end bonuses… our expenses had ballooned like a puffy soufflé.
For the first time in our history, we used the credit line to make payroll, a no no, apparently. To make this crystal clear, Wells sent a letter stating our credit line had been cancelled; we had but a few days to pay back $2 million or be sued for default.
My partners and I jumped into action; my task was to buy us time.
I knew just who to call: Barbara.
“Barbara, let me get right to the point,” I said. “I am calling to apologize. I should have kept you up to date on all that’s been going on around here at Alta. Y’all have always been so good to us. What’s it been, 15 years we’ve been with Wells Fargo? We could not have grown as we have without you, and I certainly understand why y’all have gotten concerned about our credit line.” With Barbara, I slipped right back into my Texas accent, as if I was sitting around the pool shooting the breeze with my brothers and stepbrothers.
She responded professionally, of course, noting that she’d warned our CFO, which was news to me. Then her tone got pointed, because guess what, Alta had been all over the news—the New York Times and Wall Street Journal, for Pete’s sake. Had she heard about the software debacle and Superstorm Sandy hit from me? No, she sure hadn’t.
Alta’s red flags, she said, were now way beyond her level of control. I pictured her in a roomful of male higher ups advocating for us all these years, and I thought of how we both were pecking away at our respective industries, and my shame grew, but also my determination. I apologized again, and asked for one thing: time.
“Barbara, we don’t have $2 million lying around. What we do have is a huge A/R from government agencies that WILL pay, contracts we’re about to sign that come with up-front payments, and a super powerful client who really wants us to succeed.” I told her we had hired a new Chief Managing Officer/General Counsel with serious chops rescuing distressed companies, and that our accounting firm’s CEO (who she knew) was personally working with us RIGHT NOW on a new cash flow model.
“I’m on it,” I told her. “And I won’t let you down.”
She said she thought could get us a month, and that I’d have to sway her bosses several rungs up the ladder.
My team and I used the crisis to upgrade our financial structure and systems. By the time of the big meeting, we’d already paid down the credit line some. We successfully swayed the Wells banking team, who withdrew the cancellation. And believe you me, I never neglected Barbara again.
Our business relationships
—banker, investors, insurance agent, accountant, lawyer, key clients, fill in the blank—
are critical.
Build these relationships in the good times so you can lean on them in the bad.
Check in regularly.
Get to know them.
Think of them as your strategic stakeholders; your success is their success.
Don’t take them for granted.
On the Xcelerate Women Capital Literacy for Founders panel I facilitated last week were two bankers who reiterated the message I’m trying to convey here: bankers are human beings whose job is to help you get the financing you need to grow your business. If they don’t have the right tool or program for you, they know others who do. If they tell you no, most of the time they mean ‘not yet’ or ‘not now.’ You need to get a full and complete grasp of your finances, develop and regularly update your business plan, and be able to answer hard questions. And if you hear ‘no’ or ‘not yet’, sometimes they are giving you a gift, because once you do take on debt, you have to pay it back even if your business crashes and burns like mine almost did.
~ Mia