Although there is currently only a slight increase in the number of bankruptcies, our expectation is that this will increase (sharply) from the fourth quarter of 2020. In particular, banks are likely to start claiming payment of deferred interest and principal again in the fall. This, if obligations can no longer be met, will undeniably lead to (more) credit cancellations.
Part 1 of this diptych outlined when a bank may cancel financing and under what conditions. It also covered the corona crisis.
This second part provides some concrete tips for business owners to avoid termination or what to do if termination does occur. In short, the do's and don'ts for business owners.
Stay in conversation with the bank
The natural reaction to (financial) problems, is to put them aside and postpone them until a time when "it's more convenient. Although this may be an understandable reaction, when facing financial problems it is wiser to inform the bank in good time about the possibilities and impossibilities of paying interest and repayment. So keep talking to the bank!
If the bank is included in the situation in good time and informed of the measures to be taken, it can guide and think along with you. Moreover, it has the necessary experience, which you may also benefit from.
Moreover, this proactive information generally leads to greater confidence and understanding on the part of the bank about your situation and can possibly even prevent termination.
Of course it is important that you as business owner know (in the background) what your duties, but also what your rights are towards the bank. We mentioned earlier in Part 1 of this diptych the duty of care that the bank must observe towards you as a customer.
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Duty of care bank - outline your interests
Whether a bank may terminate and under what conditions depends on what is stipulated in the general terms and conditions and the contract. As a rule, the bank has a contractual termination option. The Supreme Court in 2014 ruled that it may be unacceptable by the standards of reasonableness and fairness for the bank to use this contractual termination power.
The bank must also take the interests of business owner (duty of care) into consideration when making its decision. It is therefore of great importance that you let the bank know what interests you have, such as the preservation of employment. Other important factors may include how long you have been a customer, how you are fulfilling your agreements, the value of securities (such as mortgage or pledge rights), what (reorganization) measures you are taking and who is helping you with these, whether you have only been affected by the corona crisis or whether there are other problems, and whether the bank has aroused certain expectations. Make sure that you always emphasize these interests to the bank and document them well (for example, in your correspondence with the bank).
Indeed, weighing all the circumstances, the court may rule that a bank should not terminate the credit or should give longer notice. In the latter case, you will then have more time to find another lender.
Meet your (financial) obligations as much as possible
In any case, try to meet your obligations toward the bank as much as possible, or at least in part. This refers not only to the (partial) payment of interest and redemption, but also to other agreements. After all, you must usually also provide the bank with information, ensure that a pledge subject to a mortgage right is adequately insured, periodically send figures and provide other relevant information. It prevents questions if you meet these as well as possible and also creates trust with the bank.
It can be counterproductive if you dig in your heels (although this can be very understandable under the circumstances). If you show that you are doing the maximum to include the bank's interests in your considerations and are doing everything possible to fulfill your agreements, this can work to your advantage. A judge will also consider this behavior if the bank eventually terminates unexpectedly and you oppose it in proceedings.
Do's and don't
Do not wait if you see that you cannot fulfill your (financial) obligations to the bank. Inform the bank proactively and don't dig your heels in. Show that you are doing everything possible to keep your agreements. If possible, come up with a plan yourself to get the situation back on track, even if you anticipate that it will take longer. Do not forget to outline the interests of you as business owner and of your employees, suppliers and customers to the bank. Where possible, emphasize the joint interest of the bank and you.
If your bank does decide to cancel your credit, get help from a specialist who will advocate for your interests as soon as possible.
Heleen Wessel-Krijger and Reinier Pijls
