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Even The Sba Will Deny Your Loan Request

Sep 30, 2009

Many small businesses find themselves squeezed for working capital. The business may be successful even during these strained economic times. However, there could desire for growth or just a safety net. Business owners find themselves working with their bookkeeper, outside accountants, and even we B2B CFO®’s. We professionals know how to present financial data to a banker; we’ve been doing it for years.

Alas, the world has changed and we must change with it. We no longer assure our clients that banks will lend cash; we do make them understand the current environment. Case in point; I recently applied for an A.R.C. loan through a money center commercial bank. A.R.C. which stands for “American Recovery Act” is the federal program that provides guarantees to banks for interest and principal up to $35,000. The application is cumbersome for a business owner but not too cumbersome for a CFO. Upon working on the application, I found it strange that so much information was requested about the Owner rather than the Borrower, which in this case was a “C” Corporation. About six weeks after the application was submitted, my client received a notice from the lender that the loan was denied because his personal credit situation was unacceptable based on the program’s standards.

I was somewhat shocked; I thought this was a slam dunk. While it is true that my client has taken on some additional credit card debt (he wanted to repay the debt with the SBA loan), to keep his business afloat, this was the SBA, the Fed’s.  As Bob Dylan once sang, “the times they are a changing.”

It appears as if the economy is beginning to recover. I see it with certain clients; others are still running below last year’s sales. Now is the time for CFO’s to dig their heels in and begin to advise CEO’s to continue tightening their belts. In fact, we cannot counsel CEO’s, we must begin to insist that they heed our advice! We must look under all rocks, look at operations, look at employment, and see if there is any fat that can be eliminated. Get involved with the sales department. Share ideas, because the end game is cash accumulation. This will indicate to lenders that the business is real, is healthy and worthy of that credit facility for a rainy day.

 

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