Monday, April 13, 2020

Can You Trust Your Banker When You Apply for an SBA Bailout Loan?

Bankers as a group do not like to be told what to do. Especially when it comes to lending.

Tampa Bay, Fl
Opinion by: E. Eugene Webb PhD
Author: In Search of Robin So You Want to Blog..

For some insight check out; New York Times, by Stacy Cowley and Emily Flitter:  Frenzy and Desperation as Small Businesses Grab for Government Aid
From the Intelligencer, by Eric Levitz: The Small-Business Loan Program Is Already Hitting 4 Big Snags
Levitz details four major concerns the banks are having with the program:
  1.  For many banks, the program looks high-risk, low-reward.
  2.  The bailout fund is too damn small.
  3. The most vulnerable mom-and-pops will likely come away empty-handed.
  4. A (well-intended) last-minute rule change makes the program a worse deal for a lot of businesses.

It works like this: 
To get cash into business owners’ hands fast: small-business owners would simply walk into their friendly neighborhood bank branches; the banks would lend them money quickly, and the government would make sure everyone was whole later.
Bankers as a group do not like to be told what to do. Especially when it comes to lending.
If you’re a small businessperson, you have probably had the experience of dealing with your banker as he/she sits smugly behind a very expensive desk and looks at you with distrust as you make your pitch for a loan.
Bankers are going to tell the Borrower what they will do and being put in the position of moving quickly and with limited time to get information about the borrower, they are to say the least uncomfortable. There are very few requirements on issuing the loan, and that takes away one of a bankers’ great glees in life, which is the opportunity to refuse your loan with that I am better than you grin on their face.
Since these loans only pay the bank one percent( 1%), they are not going to be falling all over themselves to make the loans happen.
Before you go screaming down the road breaking every speed limit in town to get to the bank, stop and think about the old adage: If something seems to be too good to be true, it probably is.
You might also want to look at this article from the U.S. Small Business Administration: What Your Lender Wants You to Know about Applying for an SBA Guaranteed Loan.
Remember the line from above: Bankers as a group do not like to be told what to do. 
On television, in interviews they are all smiles and grins about this program, but my guess just under the surface they are about as pissed off as they have been in a while.
So, borrower beware…..
This is very defined program with very specific guidelines, and your banker may try to steer you into a different loan, a non SBA loan or one that looks like or sounds like the SBA Guaranteed Loan program but is not.
Check out the link above, make sure the paperwork clearly states you are applying for and receiving a loan from the SBA Guaranteed Loan program. If you have an attorney, it would be a good idea to have them look over the Loan Application to make sure everything is on the up and up.
You don’t want to end up with a $100,000 loan that in a few months when the loan forgiveness program kicks in your “friendly” banker has the gleeful opportunity to tell you YOUR loan was not one of THOSE loans.
You may be desperate for the money but do your homework. I am sure there are a lot of banks and bankers out there that genuinely want to help and will play by the rules. I am equally sure that banks, all of them, put their interests ahead of yours.
This is a business deal, not a chest bump be careful.
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