Thursday, April 23, 2020

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

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

You may want to think twice about that SBA bail out loan. Check out Tampa Bay Times By Graham Brink: Fraud, bad actors are inevitable with $350 billion federal loan program.  
If you passed on clicking that link go back and click it right now and read the whole article!!!
Graham Brink makes a number of good points, but the key among them is the fact that the federal government is not going to investigate these loans. They will incentivize outside lawyers and others to do the work for percentage of recovery or a fixed fee. And you can bet the media print and electronic will be all over this one.
What that means is an army of people will be looking at every PPP loan large or small for any hint of fraud or even accidental misuse of the funds.
Don’t think for a minute you can skate because you are mom and pop operation with a couple of employees.
You are the one they are looking for.
The big guys have a gang of lawyers to get them off. You don’t.
Don’t look to your banker to keep you out of trouble. When was the last time you saw a banker take responsibility for anything?
If you decide to play some games with any of this money, you could be in very serious trouble.
As Brink points out, even accidental misuse may not get you off, because in this case stupid will not be an excuse.
This second round of loans will be similar to the first, with probably a little more attention paid to who gets how much and with an emphasis on getting money smaller businesses. Don’t get all teary eyed, this is serious business.
If you take the money and misuse it the loan will be recalled in full and there may be interest and criminal penalties depending on the circumstances.
If you are going to play in this game, ignore everything the banker tells you, get a good lawyer and/or a CPA and document every penny of this money.
It would be good idea to ask banker/lender him/her for a letter on the lending institution letterhead that states this loan (reference loan number) is one of those PPP forgivable loans. If your banker/lender won’t do that I would a) RUN and b) report them to the SBA.
Here is another chilling thought.
Every one of your employees will be watching where the money goes. My guess is whistle blowers will be encouraged and well compensated.
That thought alone should keep you up at night.
For reference, the original post follows.

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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