When a business loan is moved to a bank’s Special Assets Group (also called the workout or special assets department), it signals that the lender views the loan as higher-risk—often due to missed payments, covenant breaches (financial ratios, reporting requirements, etc.), declining performance, or other issues. The bank is typically shifting focus from supporting the relationship to protecting itself and minimizing losses. Being told to “find another lender” usually means the bank wants to exit the relationship entirely (often by having you refinance and pay them off) rather than continue or renew the loan.
This situation is stressful and time-sensitive, but many businesses successfully navigate it. Important disclaimer: This is general information based on common U.S. banking practices (applicable in Indiana and elsewhere). It is not legal, financial, or tax advice. Outcomes depend on your specific loan documents, financials, and state/federal laws. Consult a restructuring attorney, turnaround consultant, and accountant immediately.
Here are the main options a business owner typically has, in rough order of priority:
- Cooperate with the current bank while buying time
Stay proactive and transparent: respond promptly to requests for detailed financials, 13-week cash-flow projections, collateral updates, and a realistic (conservative) business plan. Build credibility by under-promising and over-delivering.
Negotiate a forbearance or workout agreement—ideally a longer-term one (e.g., 6+ months) with reasonable milestones, possible rate reductions, covenant waivers, or extended amortization in exchange for any concessions you make (new collateral, personal guarantees, etc.). Avoid short “rolling” extensions that keep you under constant pressure.
Do not rely on the bank for additional credit during shortfalls.
2. Hire professional help right away
This is often the highest-ROI step. Engage:
A restructuring/workout attorney experienced with bank Special Assets (they understand leverage and can negotiate better outcomes).
A turnaround consultant or financial advisor to handle reporting, projections, and operational fixes so you can focus on running the business.
Bankruptcy counsel (even if you don’t plan to file) as a “backstop”—knowledge of Chapter 11 (or Subchapter V for smaller businesses) often gives you negotiating power because banks prefer to avoid the automatic stay and court oversight.These professionals can also help evaluate viability and explore all paths.
3. Pursue refinancing or alternative financing (the most common exit strategy)
Because your current bank wants to exit, you should quickly secure a new lender to refinance and pay off the loan. Move fast, as Special Assets teams often impose strict deadlines. Options include:
Asset-based lenders (ABL): These are frequently the best fit for Special Assets situations. They lend primarily against collateral (accounts receivable, inventory, equipment) rather than strict cash-flow covenants or credit history. Many specialize in “turnaround” or higher-risk borrowers.
Other non-bank or alternative lenders: Factoring or accounts-receivable financing (to accelerate cash from invoices), equipment financing/refinancing, merchant cash advances (use cautiously—they’re expensive), or private lenders.
SBA-guaranteed loans (e.g., 7(a) program): Use SBA Lender Match to connect with approved lenders; these can sometimes refinance existing debt and are more flexible than pure bank loans.
Credit unions, community banks, or CDFIs (Community Development Financial Institutions) in your area (Indiana has several).
Expect higher interest rates/fees and possibly stricter collateral requirements, but these lenders often have fewer covenants.
4. Improve operations and cash position immediately
Cut non-essential expenses, accelerate collections, liquidate unused assets, eliminate unprofitable lines, and focus on core viability. This strengthens your story for new lenders and the current bank. Cash is king—maintain strong liquidity projections.
Strategic business alternatives (if refinancing isn’t immediate)
Inject equity (from owners, investors, or family).
Sell non-core assets, merge, or sell the entire business.
As a last resort, consider Chapter 11 bankruptcy for court-supervised restructuring (it can force a workout or give breathing room). Subchapter V is a streamlined, lower-cost version for smaller businesses.
Key realities and tips:
Costs will likely rise (higher rates, fees, legal/advisor expenses) while you’re in Special Assets.
The original bank relationship is probably ending permanently (“scarlet letter” effect), so focus on a clean exit.
Time is critical—delays can lead to enforcement actions (e.g., foreclosure on collateral).
In Indiana, you have access to regional asset-based lenders, SBA offices, and local resources—your advisor can help identify them.
Immediate next steps:
Contact a restructuring attorney today (search for “Special Assets workout attorney” or “commercial loan workout Indiana”).
Gather your latest financials and start building a 13-week cash-flow model.
Reach out to alternative lenders in parallel while negotiating with your current bank.