What a community bank should do when a customer's business is in trouble

In 1988 my parents' bakery on Hawthorne Boulevard nearly lost its lease. I was fifteen. A loan officer from a small bank came to our apartment above the shop three evenings in a row, sat at the kitchen table with my father's green ledger, and found a way to make the numbers work. The bakery survived another nineteen years. I have spent my career trying to be that loan officer for someone else, and I have learned that it is a specific set of behaviours, not a sentiment.

The first behaviour is speed. A business in trouble is losing options every week. Most of them do not call the bank, because they are embarrassed, or because every other bank they have dealt with treated a missed payment as the beginning of a legal process rather than a conversation. So we call them. Our lending team reviews every business account that shows three warning signs — falling deposits, rising overdraft requests, a missed vendor payment — and a person, not a letter, calls within two days. The call opens with the same sentence every time: 'We've noticed some pressure on the account and we would like to help before it becomes a problem.'

The second behaviour is to go to them. I have never understood why banks summon struggling owners to a conference room. The business is where the problem is. If the restaurant's freezer is the issue, you learn that by standing in the kitchen. If the problem is that the owner has been paying staff before paying himself for eight months, you learn that at the kitchen table, from the spouse. In twenty-five years of lending I have never had a conversation in a customer's shop that was not more useful than the same conversation in my office.

The third is honest arithmetic. Hope is not a plan, and neither is a loan that makes next month easier and next year impossible. We build a thirteen-week cash-flow forecast with the owner, in a spreadsheet they keep. Sometimes the forecast says the business is fine and needs a bridge. Sometimes it says the business is not fine and the kindest thing we can do is help the owner close it on their own terms, with the house still theirs. We have done both. The second conversation is the harder one and the one I am more proud of.

The fourth is to use every tool the bank actually has, not just the loan book. Restructuring a term loan is one tool. So is a ninety-day interest-only period, a line of credit against receivables the owner did not know could be lent against, an introduction to the Small Business Development Center, or a call to a supplier who also banks with us. In 2020, during the eleven days of Paycheck Protection lending, the most useful thing we did for several customers was not the loan — it was telling them which of their landlords were also our customers and might take a call.

The fifth is to be the same bank afterwards. The owner who survived a bad year with our help should not find, two years later, that we have quietly reduced their line and raised their rate. Our loan committee tracks 'rescue' accounts for five years. They default less often than our average borrower. That is not luck. It is what happens when a person has been through the worst with you and decided to stay.

None of this scales the way a national bank would want it to. A relationship manager at Meridian carries about eighty business accounts, not four hundred. We accept lower growth for that. The board had a long conversation about this in 2021 when we were offered a price for the bank that would have made everyone comfortable, and the question Eleanor Hastings asked settled it: who would the loan officer be, afterward, for the family at the kitchen table?

If you run a business in Oregon and the numbers have stopped working, the single most useful thing you can do is call your bank before it calls you. If your bank is us, my direct line is on the website. If it is someone else and they do not pick up, you know where we are.