An SBA guaranteed loan workout…what can be done? More than you may imagine.

Friends,                                                                                                                                                                                                                                                                           If you are reading this post, you undoubtedly have an SBA guaranteed loan and are having problems with it.

Please read this post and a number of others  listed and linked below. You will learn a lot, as there  is much misinformation being spread about which borrowers are relying upon. Sources for reliable information are almost non-existent. This may be the only available source for real reliable information.

One must be knowledgeable to launch a meaningful defense and a powerful offense.

Start here, then call me.                                                                                                                               <a name=”9858953758″></a>

SBA guaranteed loan workout myths….do not believe everything you hear

Do you need a lawyer for an SBA workout?

SBA Loans can be dangerous. Be careful.

Do not feel bad about defaulting on your SBA guaranteed loan, your covered.

SBA workouts, bank workouts, all workouts,  are a business negotiation, not a legal issue.

Debt workouts…, too good to be true?

Co-signing a guaranty to the SBA or any note. What does it mean?

Yes, the seemingly impossible is possible! SBA workouts can go very well indeed. Two recent examples.

Surprise! No negative credit issues from defaulted SBA guaranteed loans!

…call Norman, in my office, at 413-584-2581. He will arrange a no-obligation tele-conference call for us to discuss your issues and I will suggest a possible action plan and the results you may anticipate.

No matter what you have heard, defaulted SBA guaranteed loans can be resolved favorably for the borrower.

Call me we can talk about it.

An SBA guaranteed loan workout…what can be done?

There is this urban lore that I frequently hear that claims that SBA loans cannot be worked out, paid off short with a compromised conclusion and with forgiveness of the shortfall.

It ain’t so. It can be done. I do it for my clients. (see, Yes, the seemingly impossible is possible! SBA workouts can go very well indeed. Two recent examples.)

It is difficult, as with any workout negotiation, and one must have a clear understanding of the SBA’s rules and requirements, however it can be done successfully if the situation is handled correctly and the timing is correct.

In fact the SBA (Small Business Administration) has its own Offer In Compromise forms, a committee which accepts and rejects and it is even willing to indirectly,  through your corresponding banker, negotiate a fair resolution for a defaulted loan. In fact it is also possible to talk with an SBA representative, although not a directly involved decision maker.

That’s both good and bad as its both the bank and the SBA that must be satisfied and each has its own rules and requirements. But in the end it’s the SBA that counts the most, although it’s the banks you talk with the most and that makes for some confusion as frequently the bank or its attorneys are not telling you the truth…at all. I hear stories about misinformation everyday!

The SBA does however have some strong requirements that are fast and hard and must be understood to avoid wasting time and being frustrated.

1.  The SBA requires that the breaching business no longer be operational when an offer is made. This is also an important part of the strategy and must be evaluated very carefully as to how this is handled in order to serve your own best interest. This is not cut and dry but subject to many important and valuable options. The business may continue if  handled effectively.

2. All the business assets must be liquidated. This is another important part of a workout plan, which must also  be handled appropriately and can be accomplished in your own best interests. Liquidation takes many forms.

3. A significant legal effort by the bank to recapture any potential cash must have been implemented before an offer will be contemplated. In other words  the bank must exhaust its legal remedies and all the collateral must have been liquidated before a negotiation for the shortfall can occur. There is some flexibility here, and this is a very important area of great concern, as many homes act as collateral for the loans and yes they can and will be liquidated if this issue is not handled correctly.

4. All the guarantors, including your spouse if he/she signed the guarantees must deal with this issue effectively and completely. If not a spouse, then  each guarantor sinks or swims on their own merits. If the debt is guaranteed by both husband and wife, there are greater difficulties  which must be worked out effectively and can be, mainly the marital home.

Each guarantor other than husband and wife, must file his or her own offer in compromise and create their own negotiation settlement.

Frequently this also becomes a source for negotiation as we want to resolve all the issues in one global resolution for all parties involved. This can be a challenge.

Keeping in mind, that the bank actually lent you the money, in most situations the SBA merely guaranteed the payback up to 80%, but since the SBA will pay the bank, they require the bank, as its agent, to exercise all due diligence and to exhaust its legal remedies to collect as much as possible or the bank may potentially violate the terms of the guaranty and lose the payback guaranty. This is the source and reason for a tough bank collection practice and a no compromise attitude.

Your lending bankers support and cooperation is important in developing a successful workout, and without a good banker relationship a good workout conclusion is harder to achieve.

The overall principles remain the same, maximum collection under the financial circumstances of the borrowers situation, clearly however this is subject to interpretation and effective presentation.

It takes time, approximately 10-12 months. The review committee is in Virginia, and services the entire country. It is a political beast and over the years, depending on various political issues, they can be easier or harder to workout loan shortfalls.

At the moment I believe the SBA is suffering many losses thus they want to stem the flow of loss, but their mission is to support the small business owners, the borrowers, so the results are mixed, mostly depending upon the quality of the preparation and presentation, tough but fair, I would say.

The SBA is very busy and reviews files in the order they are received. They typically ask for additional information, once under review, to better understand the financial condition of the guarantors and thus it can be an extremely long procedure, which can take many months,  to conclude. The first offer is universally rejected, demanding a higher offer whch many applicants provide. There are alternate strategies which work more effectively then simply raising the ofer.

Once rejected, I have had success in modifying the offer further, the “second wave” negotiation I call it, adjusting the terms and conditions and even lowering the payoffs further than previously offered, based on the realities of the borrowers condition because of the long passage of time, more erosion of the borrowers financial condition can occur, resulting in a lower offer as a response.

This second pass is very important and can yield extraordinary results.

You know were you are headed before anyone else, thus planning is critical for the best outcome for the borrower. Preparation for a workout is critical for the best results.

Definitely hire someone experienced and therefore knowledgeable regarding the practices of the SBA and such workout scenarios and it will all work out for the best for you. Do not experiment, do not do it yourself, do not listen to advice from the bank.

Additionally, there are sometimes serious potential tax consequences regarding workouts and forgiveness of debt which can be quite devastating and must be considered throughout the workout negotiation, or one runs the risk of solving one problem while creating another almost as large. Remember debt forgiveness is converted to ordinary income for IRS purposes and ordinary income calculations. There are many exceptions available, there are strategies around this issue.

I would be delighted to review your case and without obligation make recommendations.

Call Norm at  413-584-2581 he will arrange a no obligation tele-conference. We can discuss your specific circumstances and design an effective strategy that will yield the best results. You can proceed with it or I can implement the plan on your behalf, that’s your decision once you are  more knowledgeable about what the possibilities may be.

I await your call.

&lt;a href=”http://wallstreetblips.dailyradar.com/blogs/” mce_href=”http://wallstreetblips.dailyradar.com/blogs/”&gt;WallStreetBlips Finance Blog Rankings&lt;/a&gt; //

 

“Where have all the leaders gone?” Lee Iaococca

The following speaks for itself. I have asked the same question in previous posts, unfortunately I have no answer. Read and act, we have done it before, it is time to do it again…revolt. Change the course of our direction, get it right. We can do it….where are our leaders to take us to where we need to go? Remember Lee  Iacocca, the man who rescued Chrysler Corporation from its death throes? He’s now 82 years old and has a new book, ‘Where Have All The Leaders Gone?’.

Lee Iacocca Starts his book:

‘Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder! We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, ‘Stay the course.’

Stay the course? You’ve got to be kidding. This is America , not the damned, ‘Titanic’. I’ll give you a sound bite: ‘Throw all the bums out!’

You might think I’m getting senile, that I’ve gone off my rocker, and maybe I have. But someone has to speak up. I hardly recognize this country anymore.

The most famous business leaders are not the innovators but the guys in handcuffs. While we’re fiddling in   Iraq , the Middle East is burning and nobody seems to know what to do. And the press is waving ‘pom-poms’ instead of asking hard questions. That’s not the promise of the ‘ America ‘ my parents and yours traveled across the ocean for. I’ve had enough. How about you?

I’ll go a step further. You can’t call yourself a patriot if you’re not outraged. This is a fight I’m ready and willing to have. The Biggest ‘C’ is Crisis! (Iacocca elaborates on nine C’s of leadership, with crisis being the first.)

Leaders are made, not born. Leadership is forged in times of crisis. It’s easy to sit there with your feet up on the desk and talk theory. Or send someone else’s kids off to war when you’ve never seen a battlefield yourself. It’s another thing to lead when your world comes tumbling down.

On September 11, 2001, we needed a  strong leader more than any other time in our history. We needed a steady hand to guide us out of the ashes. A hell of a mess, so here’s where we stand.

We’re immersed in a bloody war with no plan for winning and no plan for leaving.

We’re running the biggest deficit in the history of the country..

We’re losing the manufacturing edge to Asia , while our once-great companies are getting slaughtered by health care costs.

Gas prices are skyrocketing, and nobody in power has a coherent energy policy. Our schools are in trouble.

Our borders are like sieves.

The middle class is being squeezed every which way.

These are times that cry out for leadership.

But when you look around, you’ve got to ask: ‘Where have all the leaders gone?’ Where are the curious, creative communicators? Where are the people of character, courage, conviction, omnipotence, and common sense? I may be a sucker for alliteration, but I think you get the  point.

Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo?

We’ve spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened.

Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane or demanding accountability for the decisions that were made in the crucial hours after the storm.

Everyone’s hunkering down, fingers crossed, hoping it doesn’t happen again. Now, that’s just crazy. Storms happen. Deal with it. Make a plan. Figure out what you’re going to do the next time.

Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing. Who would have believed that there could ever be a time when ‘The Big Three’ referred to Japanese car companies? How did this happen, and more important, what are we going to do about it?

Name me a government leader who can articulate a plan for paying down the debt, or solving the energy crisis, or managing the health care problem. The silence is deafening. But these are the crises that are eating away at our country and milking the middle class dry.

I have news for the gang in Congress. We didn’t elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bonehead on Fox News will call them a name? Give me a break. Why don’t you guys show some spine for a change?

Had Enough? Hey, I’m not trying to be the voice of gloom and doom here.  I’m trying to light a fire. I’m speaking out because I have hope – I believe in America . In my lifetime, I’ve had the privilege of living through some of America ’s greatest moments. I’ve also experienced some of our worst crises: The ‘Great Depression,’ ‘World War  II,’ the ‘Korean War,’ the ‘Kennedy Assassination,’ the ‘Vietnam War,’ the 1970’s oil crisis, and the struggles of recent years culminating with 9/11.

If I’ve learned one thing, it’s this: ‘You don’t get anywhere by standing on the sidelines waiting for somebody else to take action. Whether it’s building a better car or building a better future for our children, we all have a role to play. That’s the challenge I’m raising in this book. It’s a “Call to Action” for people who, like me, believe in America ‘. It’s not too late, but it’s getting pretty close. So let’s shake off the crap and go to work. Let’s tell ‘em all we’ve had ‘enough.’

Make your own contribution by sending this to everyone you know and care about. It’s our country, folks, and it’s our future. Our future is at stake!!

 

Watch this video…It is July 4th, it is time for the second revolution, here is your invitation…show up!

We The People

Posted: 03 Jul 2009 07:38 PM PDT

Watch this video!

It is about our survival as a democracy , about the stimulus package, Congress, the Constitution and many other topics.

He says what I believe is the truth and I believe what many think. The problem is where are our leaders, either in Congress or outside of Congress. We stopped the government over Viet Nam many years ago. We can do it again. Where are our leaders, where have they gone? We need them now more then ever.

Enjoy your Juky 4th weekend…it may be our last if we cintinue to fail to act, if our leaders continue to fail to lead. Until we remember it is all about ‘We the people” until our politicians remember they are here for the general goodwill of the people, we will not survive long as a democracy.

Watch, and show it to someone else, certainly your kids. They will be paying the price for our ineptness.

 

What happens when a bank refuses to accept an Offer in Compromise for an SBA guaranteed loan?.

Lets review. As we know, the defaulted borrower of an SBA guaranteed loan must present his Offer in Compromise to his lending banker for review and ratification and then for him to send it over to the SBA for final consideration.. If deemed acceptable and appropriate it is then sent over to the SBA were it is decided with a response to the borrower being: yes, no, or a counter-offer is provided.

However the real issue arises when the banker says No, rejects the offer in compromise and never submits it to the SBA for  final consideration.This happens frequently and is a potential problem.

What then? As we are stuck in the mud if we cannot get to SBA for final consideration of the Offer in Compromise.

Typically the banker believes there is more equity available, or additional assets that can be liquidated or that the offer is either too low or outright frivolous under the existing circumstances.

We have had this occur and we can do two things to counter this.

1. Continue to negotiate and offer more until you reach the bankers level of satisfaction. This will require you determining what the issues are which is also a problem as bankers typically will not tell you  ‘not wanting to negotiate against himself’ and simply demanding more. A possible nightmare.

2.  Second approach is to request the banker to submit the 0ffer without his support and recommendation. This is likely to result in a rejection by the SBA but gets you into the system and allows a direct negotiation with the deciding committee, and a possible resolution. It could also be sent back to the banker to resolve which may result in more cooperation from him in an effort to put closure to it.

In the end, it will probably require a higher bid, but in view of massive forgiveness, a little more may be affordable.

Tenacity, focus and follow through is needed when this happens and eventually your offer will be considered. It is best to have a third party represent you throughout this process as more cooperation and information can be gleaned by the third party then by the borrower. The borrower is always considered the bad guy, the third party representative is neutral and can frequently get better results.

Call us if you are stuck. 413-584-2581 Norm will arrange a teleconference for us to discuss a strategy.

 

Bankers occasionaly make emotional decisions.

A banker, like any other successful business owner, they need to be emotionally self sufficient to do their job effectively. They should be, but they are not always. Bankers, like many of us, frequently are controlled by their emotions and  sometimes make bad business decisions because of this unfortunate fact, a personal weakness. This is more  prevalent then one would imagine. We see it way too often.

Recently I had a banker admit he would rather not accept the appraised liquidated value of the assets in an asset sale as the number was “embarrassingly low’ and would make him look bad, so he believed, thus he preferred to reject the offer and go to auction were he  agreed he will get significantly less but it is more acceptable as it is based on auction value not his personal effort to liquidate the assets, thus he saves face by going to auction and not having to support a very low buyout of the assets….amazing! Less cash but less embarrassing, so ok.

The offer was for $120,000. the exact liquidated value as appraised. The loan was $1.8 million, and the likely return at auction wasl  $25,000 if anyone bids at all ad not considering the coas of foreclosure and liquidation by auction. Yet the banker rejected the offer  to save face. He said he could not bring such an offer to his committee he would prefer to make less at auction. It would make him look bad he said.

This is not unusual. I have experienced this in other instances.

In another situation, the banker stated his preference to wait a few years before liquidation, as maybe the market will return by then and the collateral will be worth more then it is worth now…again, WOW!  Another emotional response hardly in line with expected and appropriate  debt resolution practices, certainly inconsistent with bank and SBA standard policy, but it felt good emotionally, for the banker, so he made an emotional decision.

None of these practices are in the best interest of the bank, or the borrower, but the loan officer or workout officer acted emotionally as described.

Something is wrong here, not the least of which is the  bank officer’s failure to recognize and respect the banks fiduciary responsibility to the borrower, a very real standard that must be adhered too. Clearly the banker were driven by emotional feelings which are counter productive and damaging to all concerned.

It is important to understand the driving force behind your banker so you can best address it with an effective counter strategy. Emotional instability is a huge issue which must be recognized and dealt with despite its inappropriateness.

 

Read this if you dare…the SBA personal guaranty. Yes hard to believe.

Typically in most commercial situations, a personal guaranty can be expressed easily in a few sentences. If the lawyers really want to develop the concept it can run a page or even more. But nothing comes close to the over extended, hyperbolic, on steroids SBA personal guaranty reprinted below.

If you signed it already, you probably never read it as you were too focused on closing an important loan and may not have cared about the details of the guaranty as you were happy about getting the loan and were not thinking the guaranty would ever become operative.  But things happen.

If you have not closed an SBA guaranteed loan but are contemplating it, read on, it should be very interesting reading. It is the most ultimate, definitive, all inclusive, absolute, complete, personal guaranty, it can be no worse. Read it and weep.

 

Post #500, a milestone: 50 ways to succeed….what works.

There are approximately 30,000,000. small businesses in this country representing approximately 70% of the jobs. It is what we do. We are a nation of small business owners and employees working in the small business arena. Big business may get the spotlight, but small business is the heartbeat of this country.

What does this mean and what can we learn from this?

Men are born to compete. Small business is were we do it. Unfortunately men tend to do it by themselves, alone without help, guidance, or support, isolated, committed and focused on your daily tasks.

I therefore offer you these guidelines, what I have learned from other business owners as they figure out what works and what doesn’t work.

Here are some of  those ideas  that works that I have learned from my clients.

50 ways to run you business more effectively:

1. Get guidance and direction from other men, your own board of directors. You will do better if you do. You cannot do it as well alone.

2. Numbers are the language of business, learn to use them and understand them, enough with the excuses.

3. Flat management is better then pyramidal organization, divest authority, grant responsibility and nurture leadership. Inspect but delegate.

4. Teams work best, far better then individual efforts, create teams, support them and let them succeed.

5. Key indicators are crucial to tracking, monitoring and thus managing your business succesfully. Use them.

6. Systems are critical for success at every level.  Create them, write them down, use them…No oral legacies.

7. Training is critical, accept this mandate and never stop training your employees. Create a career path based on training.

8. Have a business plan before you start up a new business or buy an existing business and make certain you have a cash flow proforma. If you have not raised enough capital to launch your business, do not launch. Wait, raise more, change your plan or cease the effort.

9. Incentive based reward systems work  very well and increase productivity and success.

10. Quality is king.

11. Be careful not to waste money on ineffective advertising. Test before a full launch.

12. Use a web site and a blog, create relationships. Web 2.0   blogging, video, facebook, tweeter, YouTube. etc.

13. Productivity is the key to profit, monitor it and make certain it is maintained at a very high level. Too much employment is self defeating. Forget the concept of overtime, increase productivity first.

14. Profit over gross revenue.

15. Do not continue in business if you cannot figure out how to earn a profit as well as  take home a paycheck both are necessary.

16. Avoid personal guaranties at all costs.

17. Never allow your wife to sign anything.

18. Protect your home from business debt, there are many ways but the best is to not be in title on your home, or organize your assets effectively.

19. Make certain you always pay your payroll taxes, use a payroll service to force compliance. Cease operations or make drastic changes if you cannot pay them.

20. Repeat business is incredibly important and very valuable.

21. Word of mouth promotion and marketing is the best form of advertising. References and testimonials are supreme.

22. Salespeople should always be compensated by commission.

23. Manage through action, set examples by doing.

24. Appreciate your employees, thank them for their effort and loyalty, support  their mistakes, errors and failed risks, it will pay you back many fold.

25. Quickbooks is most often the answer to effective accounting management systems.

26. Define your market niche and capitalize on it.

27. Ask your employees, customers and vendors how you are doing, take their advice seriously.

28. Leave your ego out of your business decisions.

29. Accept responsibility for your own errors, and reward and recognize the success and achievement of your employees.

30. Successful business is built around high quality employees, find them, keep them, train them,  build around them.

31. Take vacations often.

32. Keep your word…always.

33. Be generous.

34. Have a sales and marketing plan. review it often and make changes when necessary.

35. A successful business is successful because the owner knows how to run a successful business, not because of how good the product or service offered is.

36. Enjoy yourself, laugh, do not take yourself too seriously.

37. Give back, pay forward for those that dug the well for you to drink out of.

38. Debt can be dangerous, manage it effectively.

39. Do  not allow debt to upend your business or personal life, do a workout.

40. As soon as you believe your debt will eventually bury you, do a pre-emptive workout.

41. Any debt can be worked out…any!

42. Always pay your payroll taxes but if you fail to, it too can be worked out.

43. If your revenues have declined, downsize your operation immediately. Excess payroll will kill you quickly and everyone will be out of work.

44. Your banker is the opposition when in default, do not listen to his demands or instructions. Get help.

45. Do not invade your IRA or 401k to pay down debt, no matter what your banker insists you do.

46. Do not hesitate to do a workout because of fear of credit blemishes, it can be rehabilitated.

47. Renegotiate everything, leases, vendor pricing, everything, this recession will last a long long time. Make adjustments now.

48. Re-define your business equation, the economy has changed you must change as well.

49. There are no employee issues, train your employees to be as good as you want them to be.

50. Enjoy your business life, you made the decision to be a small business owner, it can and should be very rewarding. Remember entrepreneurs  are unemployable, you had best make it work.

This is part of what I have learned  from my clients, I expect to learn much more. I thank all my clients for showing me the way to succeed.

 

Fee structure must be redesigned to adjust for todays economic and business conditions.

Recently many small business owners are finding that a  more creative approach to billing fees works far better then a static  traditional one way fits all approach.

I have found that a flat fee works very well, even in a traditional hourly billing relationship. This allows the client to know exactly what the price will be. Then once established you can finance the fee over time with weekly, monthly or whatever time period makes sense. This is the best of both worlds a fixed price paid over time.

In other situations, when success is measurable a fee can be determined by the degree of success. This is hard to generalize about as different businesses have different metrics and determining your value added service is sometimes a challenge but sometimes clear and obvious. If you can determine the effect of your effort in bottom line dollars bill accordingly, it will work for everyone.

I am not a big fan of hourly fees. but if you must then sell in small units, bite size sections, all adding up to a larger number but with small commitments along the way, affordable and it works for all involved.

Here is another approach, if your fee is a larger fee, and the job is done in a short time, finance your fee split it up over a number of months, as many as required to ease the cash flow burden and get the deal done.

Discounting of course is the bane of all business men these days, as it is very common for tradespeople and other businesses to bill so low there is little or no profit at all, but it gets the job  and the extras ,the change orders, earn the profit. Low ball to get the bid get the job and then live off  the extras it pays for the men… and provides some profit on the extras.

Loss leaders can also do the same. Bringing in the client with unusual offers that are possible even below cost and then earning  repeat business or expanded business.

Give aways and gifts also successful tools for bringing in business and retaining clients. Bartering works under specific circumstances. It is true that under the current economy people are spending less, want quality not quantity and want a good deal. This is a challenging time for every small business owner but with challenge comes opportunity. Figure out how to bill effectively and beat your competition to the punch.

 

Managers manage systems, systems manage employees.

We say many things about systems. The line I like the best is …managers manage systems, systems manage employees. This really sums it up.

Systems are a guideline telling you how to do the various parts of your job. It is the path to overall success. Presumably if the business plan is on point and if you follow all your systems you will succeed. It is the variations from the theme that destroy success. Not having financial reports because the bookkeeper did  not follow the system to create such reports is fatal. You will find out your broke after the fact.

Not having a comprehensive sales and marketing system destroys a sales program as it gets out of control and the proper procedures are not being done in the proper time.

Not having guidelines for operations prevents orderly production and destroys productivity. These are the barriers that prevent us from reaching our goals and systems are the tools to overcome these barriers.

If you were to break down your company procedures  every business has a financial department, a sales and marketing department and an operations department.

Each department has many tasks to do. In the sales department there are sales calls, sales reports, call backs, new prospecting, new proposals, sales orders, sale service, and on it goes.

If you were to analyze each sub section, each procedure and draft out exactly how you want it done step by step, and provide tracking forms and information storage tools, we would be building a book of systems. The more systems the better. Why?  Business is not about reinventing the wheel each time. It is not about improvising, doing it differently every day, just because. It is about doing it consistently every time the right way. It is about training the employee how you want it done every time. It is about not making things up,   and not doing it incorrectly because you just did  not know how to do it the right way, no one showed you. There was no system in place.

If the systems are written and not dependent upon oral tradition and one employee showing another. You will have the basis of a training manual.

If someone is out or a new person is hired you can make certain the job is done correctly because you have a system to look at.

People get lazy. They skip steps, they fail to keep important information, they take the easier path and you only find this out when something goes wrong  because you either had no system or it was not written down and thus not followed accurately.

You are frequently adding systems as you go when you develop a new business. But do you design the system carefully and draft it out step by step, infrequently?

This is not about removing creativity or innovation, were it does not belong. Systems support innovation and creativity in the proper place at the proper time, adjustments to the system can be made based on experience and trial and error, as long as you have a foundation to grow upon successfully and innovate productively, a system.

Systems also allow managers to manage successfully by tracking the systems. You have common benchmarks, reports and procedures so you can tell what your employees are doing and if they are doing it correctly, systems manage people… managers manage systems. How true.

So how can you get the right reports as often as we should, it is a system in place. Your salespeople call your customers on time and as dictated  by the system. They of course can vary from the theme as long as they follow the system at a minimum.

Evaluate your business and start having your employees draft out the systems they follow, you will learn an enormous amount about how your business is being run, and most likely it will not be as you want it as a business without systems is a free for all, a gang of people going in different directions doing the best they can the best they think they should be doing. It is as if they were walking through the woods without a compass or a map. You will never get to your destination…on time or as successfully as you could..there is no map.

This will increase productivity, make employees happier as then they will no what is expected and how to do their job.

Boring, hell no, exciting…finally you will gain control over your business and employees and sop being a baby sitter.

Systems, the real difference between victory and failure.

 

Small Business Owners are not talking about their financial problems. It is time to come out of the closet and get help.

I have often wondered why business owners are so reluctant to admit they are in financial difficulty.  We at Second Wind do a remarkable job and literally save hundreds of businesses, the business owners homes and possibly even their family structure as the stress of total economic wipe out results in many destroyed families. Yet they take their bullet quietly and go down with hardly a whimper, alone. It is unnecessary.

We are winning the war…one business at a time…but far too many businesses are failing, losing their war and we could help them.

We looked into this and found out that business men would prefer to talk about their impotence then disclose their business failures and economic meltdown. No one wants to discuss this matter even with their best friends, thus few know their best friends  business issues or their financial decay that they are experiencing as men keep a stiff upper lip, face their battles alone and fight their wars with little fanfare, help or discussion, especially with their friends and quietly face self destruction. Not that this economy is anyone’s fault, it isn’t, but the resolution is your own responsibility, survival is your own responsibility, your family and your employees are depending upon you to figure it out.

You must ask for help. You cannot do it alone. You must talk to your friends and show them the way…to us.

It’s time to come out of the closet. It’s time to spread the word, it’s time to help those who do not know. There is a small business bail out plan that works as well as handing out billions of dollars to business owners who are upside down…debt relief, our plan. But you must step forward ask for help and accept the answers we can provide as we offer a second chance without the bone crushing debt you are trying to absorb and will ultimately fail trying. No bankruptcies, no legal process, simple business strategies that work very well.

This  silent suffering and failure must stop. It’s not about being a bleeding heart, it’s more about helping another businessman survive or helping yourself survive. We are a unique resource, one of a very few businesses who aim their services at the small business market and we can only help those that step forward and identify their issues. Our track record is incredible, our strategies are unique and work extremely well. We have saved hundreds of businesses from failure and liquidation.

Tell your friends our story,  tell us your story. You or your friends may need our help and no one is talking about this as everyone want to remain private and appear to be successful.

I get it, men do not complain, and do not share their financial condition with others, but now is not the time for this, talk to us, talk to each other  let us help you get the help you need.

 

Bankers are demanding defaulting borrowers liquidate their IRA’s and 401K’s to pay down debt?? Outrageous!

Are there no limits at all? Is it really only all about collecting… no matter what, no matter how? Is it ok for a bank to demand that a borrower empty his protected IRA or 401K to pay down the debt owed to a bank? NO it is not OK. It is dead wrong!

I am hearing this more and more, bankers making demands that borrowers do just that empty their protected retirement accounts to pay down bank debt with the bank demanding this occur or will not support an offer in compromise for SBA guaranteed loans.

Does the SBA know this is happening?

Are they supporting this outrageous over reaching? I say they must know as the bank is their agent and the banks disclose most every collection effort they make to the SBA and thus I believe the SBA is quietly condoning this excessive practice all in the name of collecting a few more dollars.

Congress put these accounts out of reach of the collection agencies and the legal process. They cannot be penetrated for debt collection.  Congress deemed these account more important to protect then the creditors claims for repayment are and thus these accounts are PROTECTED.

Or are they?

If banks are permitted to demand that borrowers liquidate these accounts for the benefit of the bank and refuse to cooperate with restructuring, modifying or refuse to process an SBA Offer in Compromise unless the borrower unloads the protected retirement  account, I say this is outrageous and tantamount to breaking the law Congress prescribed to protect these accounts. The bankers have too much power for borrowers to resist their demands. It is not fair or right.

DEMANDING LIQUIDATION OF PROTECTED RETIREMENT ACCOUNTS, WHILE NOT ENFORCEABLE, CARRIES SO MUCH WEIGHT WITH THE DEFAULTING BORROWER THAT IT MUST BE CONSIDERED AN ILLEGAL TAKING OF PROTECTED PROPERTY.

Denying the borrower access to an Offer in Compromise procedure unless the borrower first empties his IRA is not a requirement of the SBA and is an example of  unacceptable behavior of a banker gone amok…but it happens and I see it more and more as bankers get more and more desperate to collect from defaulting borrowers.

Does a banker believe his defaulting borrowers IRA is exempt from this congressional protection? Jut because a borrower has the right to say No yet succumbs to the bank pressure and “voluntarily” liquidates his or her retirement account in order to satisfy a bank demand is a reasonable interpretation of protected property?

This is wrong wrong wrong. People are intimidated by their banks demands. They are powerless to resist such orders, and bankers must not use their power to circumvent the law and pretend it was a voluntary act by the borrower. No where does it say it is OK for a banker to demand liquidation of an IRA before he will permit a submission to the SBA for consideration.

What ever happened to the banks fiduciary responsibility to the borrower? Did that go out the window when the loan was defaulted?

Shame on the SBA for allowing this to happen

Shame on the baker for being such a scoundrel.

Stop this bad behavior. There are limits as to what is acceptable standards, or do banks simply have no standards at all.

 

Here I am, more web 2.0 locations, its beginning, check me out! Facebook, Tweeter, YouTube, blog

I said I was going to do it, and I am. Social networking

You of course know all about my blog, your on it now. This works terrifically as I just had my 100,000th visit yesterday after posting 496 posts. My blog is being reviewed by three major book publishers each vying for the rights to publish a book out of my blog material!

I have my facebook location http://www.facebook.com/dontodrin, and have discovered, created as well as renewed many relationships and stay in touch with people all over the country. This is more fun then business.

Second Wind Consultants now has its own facebook URL:http://www.facebook.com/pages/Second-Wind-Consultants. A place were I discuss my debt  workout experiences, something many people are concerned with and want to know more about what and how we do it.

I am on Tweeter and have been tweeting for a few weeks, figuring it out  and am waiting to be discovered. I have 17 followers, just a beginning, and look forward to having many more. My Tweeter account is: http://twitter.com/DonTodrin

Here I comment mostly on workout issues I am involved in, of course without naming names but telling the stories people need to hear, as debt is crushing so many small businesses, who could be helped with our strategies.

I have my YouTube account set up but have not yet posted any videos, I am working on it and will soon, and then I will let you all know what my address is.

So here it is, my start with Web 2.0. I will let you know its impact, what it does for me my business and others who discover me.

Join me, lets see what happens. I will report the results.

 

Fathers Day Post #3: What motivates a small business owner?

This is the third Fathers Day I have been writing my blog and each Fathers Day I write something about fathering and how it somehow relates to small business. I know, it’s a  little over the top, but it works for me and I get quite a few hits on these posts so hopefully they have been meaningful to other small business owners who are also fathers, so here we go, Fathers Day post #3

What motivates a small business owner? No it’s not wealth, that is a result, but not the primary goal, although sometimes it may appear so.

Power, another result and while important not the real motivating force,  not the heart beat.

Independence, nice, also important, and certainly part of the equation but we are not there yet.

Success…now we are getting closer. Competing and winning, closer yet. Legacy….ooooh  legacy, very important  and what does that mean and how does this work into the program? How does this relate to Fathers Day.

There are certain innate requirements that every man lives for and by. This shows up very clearly in the small business owner, as the small business owner is the true warrior in the spirit of what a warrior was thousands of years ago. Protecting their family from harm, providing food and shelter with the strength and cunning of a hunter and a craftsman, a leader in the true sense of the word. A man, a father putting his own needs second, behind the needs of his family and village.

Success to a small business owner is the exhilaration and sense of accomplishment of competing and winning…and therefore ultimately being able to provide for and protect his family. A man must compete and win…that is our mission and the fruits of our labor  and our level of  success are measured by our ability to provide for and protect our families.

From this we create our legacy. How we lived our life, what we demonstrated through our actions, not our words, as a mans character and worth is measured by his actions. Our legacy is what we pass onto our children, how we lived and therefore how they may follow and also live. The moral fiber and character of the father is the legacy he leave his children. How we are remembered after we are gone. How we lived our lives. How we competed.

This I believe is inherent in what motivates us to be the man we want to be and run our small business as a small microcosm of who we are, how we compete and how we act, all resulting in our legacy, our most important gift to our children.

Do we as small business owners recognize this? Not frequently as we allow ourselves to be trapped in the daily tasks of business. But once a year on fathers day we are recognized and honored.

On his day it is worth contemplating for a moment, what it all means, what we are doing and what we are trying to accomplish. What is it all about?

This is why so many fathers are involved in small business as we are warriors. Built to compete, to succeed and to prepare a legacy worthy of passing on to our sons and daughters…How to live your lives as your fathers demonstrated.

I have watched my father live his life and have modeled mine after what I learned.

My son and daughter are watching me and are patterning  their lives from what they have experienced and learned from me.

My father, retired now,  was a small business owner working out of his home selling insurance. I began my business in the house and moved down town when it out grew my home.

It will be interesting to see what my children do. But far more important is what I learned by watching him live and work, and then what my children learned by watching me fight my battles and live my life, demonstrating my standards and character and showing them what I believe is he right way to live. All of this is legacy and how we as small business owners work and live is a huge part of what we each to our children.

Happy Fathers Day to all the small business owners who are also fathers…I wish you success in developing your legacy and in becoming the man you want to be so your children will know who you were and what of you they will carry on within in themselves and pass onto their children.

Think about it. What does your legacy to your children look like to them.

 

How deep are your cash reserves?

Lets get realistic, you cannot succeed without adequate cash reserves, more money then you projected you need. Not having adequate reserves can prove fatal.
Most entrepreneurs are very capable business owners. They are frequently, incredibly talented, brave, bold, tenacious, committed, focused, and sometimes successful….. many more would be, if they only had enough cash in reserves to cover for unplanned events.

Here is the first problem, the cost of goods, weekly payroll, and necessary overhead line items, comes due prior to the receipt of receivables and if none are available when needed the business begins to implode. This can kill any business, quickly, as you will simply run out of cash and come to a shrieking stop if adequate cash does not exist. This however can be planned for in the original projected cash flow as the timing is predictable thus the investment required can be determined, unless you did not project accurately and few can.

Not enough sales and  you are out of balance.. Not enough revenue means not enough profits, and this will stunt or stop  basic operations. It requires additional cash then what the business has.

Adding pressure and velocity to the situation is being in a growth curve. You must exist  this month on last months smaller sales volume while you try to grow to achieve this months greater sales, thus requiring additional investment to support the growing demand. Impossible without additional cash. Growth can be harder to predict accurately in the beginning thus you need cash reserves to support the real time growth curve.

Then of courser something happens, normal seasonal variations, a bad weather month, a receivable that goes uncollected, a canceled order, a late delivery of necessary materials, all the normal variations of business which upset the cash flow and force you to go off your projected cash flow projections.

Without cash reserves, this will cause a rapid downturn that most small businesses cannot climb out of. The owner begins to stop taking a pay check, buys less inventory, reduces sales and marketing effort and  gets smaller, accelerating the downturn and the cycle continues to erode the possibility of long term success.

The problem is no reserves. No way to handle the unexpected,  the peaks and valleys, normal interruptions, or rapid growth.

It is more then having enough cash to support the original cash flow projections. It is all about having adequate reserves to cover the unexpected or unpredictable.

This can be the difference between success and failure.

In other words, you really cannot do it on a shoe string. A small business must have adequate cash reserves to be able to successfully implement a somewhat unpredictable growth and development plan and to navigate the unexpected.

The reality is far too few small businesses can satisfy this need  and are operating with too little cash reserves  if any, and thus will fail because they run out of gas.

How deep are your reserves?

How much gas do you have in your tank. Enough to get where you want to go? Check it out.

 

Want to buy or sell a business? Remove the debt first.

There are many businesses for sale today, and many potential buyers interested in buying. One huge obstacle is the debt the selling business is carrying, forcing the purchase price higher then what you want to pay, higher then what it may be worth…a very common situation. Many sellers try to load their selling price with the full debt load, as they believe this is what they must do, thus no sale will occur.

Sometimes the business is facing foreclosure and the bank is forcing the business owner to sell or face foreclosure liquidation, and once again the business owner adds the debt to the selling price.

Many owners understand the notion of a short sale, but they still start with the debt and then look for as much as possible even if it is less then a full payoff, understanding the bank will accept less. Even a short sale strategy, while better, is not always good enough, as it still presumes a significant debt paydown.

Here is the better strategy.

Either the buyer or the seller can initiate this workout procedure as it is the same strategy, it is really just a matter of who understands it and utilizes it to their advantage. The buyer can offer the seller to provide our services to rid the selling business owner of its debt enticing him to sell the assets to you for liquidation value and enjoy the benefits of debt relief, thus resolving the sellers major issue and allowing the buyer to purchase at rock bottom prices, while satisfying the banks liquidation requirements, but not the debt so they release the assets with a minimal payoff.

Wow, that’s a powerful strategy, with a terrific result.

Alternatively, the selling business owner can initiate our debt stripping  workout mechanisms and strategies we provide and then market the business without the debt , selling the business assets at whatever fair price he can get.

Debt is the killer of deals that could be made. Deal with it and win, whether you are the seller or the buyer, it works just as well. Strip the debt off the assets and deals can be made.  Debt kills the deal.

 

The Market Ticker, by Karl Denninger, an extreme view of business world

This is a must read web site: http//market-ticker.denninger.net/

This is a blog that I can highly recommend to anyone who is interested in the ‘other side of the coin’.  Here are the views that we do not read in the newspapers, the opinions that our politicians do not consider, and the arguments that are not being made by those in power.

Fortunately, as in the Revolutionary days, freedom of the press still exists -although maybe not in the press itself so much – but thankfuly on the intenet, where ideas can be traded, and thoughts explored.  Thankfully there are many very bright thinkers out there, thinkers taking the time to research and expound on today’s current events, especially economic current events, the events which effect all of our businesses, and our lives.

Karl Denninger is just such a person, brilliant and successful; he’s a great writer and focused on what we should be considering, thinking, and yes, doing.  Denninger explores areas which are clearly not what mainstream politicos -and our leaders- are talking about or considering.

He has a lot to say -and there is a lot to be learned.  He is very enjoyable to read, and in fact if it were not all so important, and if the issues he explores were not so dangerous, he would actually be fun to read.

The reality is that he is extremely interesting, and he supports his opinions with fact.  We live in a precarious time and people like Karl Denninger are possibly the Ben Franklins and the Thomas Jeffersons of our time.  People daring to think, write and debate the current issues of the day …no matter how dangerous their thoughts and comments may seem to be to the system, to the status quo.

In today’s world the economy effects us all for good or ill.  We must all be informed as it is very important.

Read Karl Denninger’s blog, he’ll open your eyes…wide.

 

A workout plan, how can I be sure it’s going to work out? What’s my guaranty?

A workout plan is an art form.

There are no direct paths to victory.

Our clients typically have many side issues. The work out is heavily effected by who the guarantors are and whether or not the borrower wants the business assets to be preserved.  Each lender has its own variations of the theme as to how they approach a workout. Every business has its own issues, and as a result no two workouts are ever the same. Some go very smoothly others are like crawling over broken glass.

The only reality I can guaranty is every workout has a satisfactory conclusion and it is most often exceptional, and less often only terrific. We never outright fail as there is nothing to fail at if our strategy is implemented carefully and with precision which we of course always do.

So time lines can and usually are adjusted, results may be slightly better or worse then projected, but in the end we always succeed in delivering our results as predicted.

Two large issues exist which  can be challenging at times, which include the valuation of the business assets which is an important matter as it determines the price for the sale of assets. The second issue which can be challenging and important is the net liquidation value of the guarantors which will determine the value of the Offer in Compromise for the personal guaranty.These can fluctuate although we spend much time and effort in supporting our claim as to what these values should be.

The important note is however the bottom line conclusion, that every workout we perform works out, resulting in a major reduction of debt and if appropriate a freeing of the assets of the business.

Remember, the borrower truly owes the money to the lender or creditor, there is no defense, thus we are walking a very thin line, we have no defense and no offense. Under such circumstances we must be able to bob and weave, and thread our way through the mine field with much broken field running, creative, focused and driven, yet it always takes on its own life and may appear different then projected but we always win the day.

Entering into a workout requires bravery, tenacity, patience, and commitment. In the end it is very worthwhile as the results are always worth the effort.

Thus any workout plan we conceive, usually follows the general theme but always is subject to changes and adjustments as the plan unfolds and the issues pop out.

It is an art form, yet it has basic structure which we always follow, one must have patience and flexibility and trust in our efforts and proven success. There are no guaranties although our track record is phenomenal.

As Manny said when the Red Sox were down 3-0 in games to the Nerw York Yankees in the American League playoffs and then won four in a row to win and then go on to win the World Series in 2004.”keep the faith baby!!!”

Good advice Manny.

 

Now what do you do with your IRA, 401k, and 403b?

For years, most of us simply trusted an institutional money manager to decide what to do with our IRA money. They determined what to invest it in. It grew and we we were all happy and we had very little involvement or responsibility for the results. It was great for many investors.

Then the meltdown occurred.

Now I hear more often then not, that most of you do not even look at your investments any more, it’s too upsetting and shocking.

Ok that’s fine for a few months but the new reality is we must take control over our retirement investments in some way and manage it more effectively then we did before. You cannot afford to lose any more.

How do we do this?

I know a man, a certified investment counselor who is providing just such a service, showing and helping everyday investors how to protect their investment and what to do with it to assure greater safety and secure growth and development, even in today’s difficult investment environment.

We must take a more active role in the results and condition of our retirement fund. We must accept this responsibility. However this does not mean we must all become experts, or do it alone.

The following is what my friend has to say…read and consider, he may have the answers you want and need. What to do with what is left of your retirement fund.

Call him. Talk with him. Consider his strategies. Take responsibility for your financial well being, you have no choice. Plan your retirement. Protect your retirement. You have less time remaining.

Here is what he says:

If you are not happy with the recent results from the meltdown of the economy and stock market, and how these events reduced your retirement fund, I can help. I provide personalized, pro-active, ongoing professional advice for retirement plan participants. This advice focuses on preserving capital first and then growing wealth when market conditions are favorable. Since we are a fee only firm and do not sell any products or get commissions on transactions, you can be assured that your best interests are always foremost in our recommendations.

Please contact him directly to schedule an on-line presentation to get an overview of the services he provide and how you can benefit going forward.

It is a must do! I highly recommend him and his services.

Contact:

Richard Mollin
Sentinel Advisory Services, LLC
63 Oak Ave.
Northborough, MA 01532
508-393-7419
rmollin@gmail.com

 

Some of you are holding on to your business way too long.

You must be realistic.  If it doesn’t work, kill it!

We have the time tested and proven strategies that are capable of removing debt and preserving assets.  In fact we can give you a second chance for your business to succeed.  

This sounds too good to be true, but it is none-the-less.  We do it routinely every day.

The problem is that some business owners are too emotionally committed to their business to make the right decision, and the right decision can be to liquidate the business and close its doors.

The allure of operating a business with no debt is very compelling.  Yet the reality is that the business in question may already be operating without paying on their debt, and yet it’s still not breaking even.  Removing the debt load thus provides the business with no cash flow benefit.  The business will still not run successfully, or profitably.

…so why continue it?

Some business owners will sit tight hoping that things will ’turn around’, that it will ‘get better soon’, that revenues will return, and that if they  simply wait long enough they will prosper… especially without any debt.

Other business owners are simply too emotionally attached to their business, and don’t want to kill their dream.

Another rationalization, which I  frequently hear, is the desire to recapture a large cash investment already made and which will be lost completely if the business is shut down.

Another common excuse is to stay open in order to protect the jobs, good people are depending upon the business for their livelihood and the owner has an obligation -to them- to continue.

By this time, in a failing small business, the owner is probably not even taking a check, but continues to want to fight the battle.

It makes all little sense, emotions seldom do, but it’s all too frequently the reality we confront.

The challenge is an effective and responsible evaluation of the business model.  If it cannot earn a profit on the current revenue without paying debt service, then the business is simply not worthy of saving.  This also includes the owner taking a reasonable paycheck, and still making and retaining a profit.

If not, then ‘kill’ the business -change the model -sell the assets but do not continue to operate as you are, even if we can strip the debt away.  

In a word, ‘ego’ is what prevents the right decision being made -and for a variety of bad reasons.

Yes! we can remove the debt and free a business to operate successfully.

However, successful operation AFTER debt reduction is the real issue.

So, if you can’t do it…get out.  If it doesn’t work…kill it.

 

You cannot ask the bank if they are willing to reduce your loan.

In fact you really cannot ask any creditor to reduce your debt, its a failing strategy, will not work and yet the most common approach. It’s as if borrowers believe the banks want to be fair and will deal even handedly and respond to such an inquiry with a reasonable compromise. Silly.

You are asking the bank to bid against themselves, they will not do it.

Additionally,  banks simply will not reduce principal, so do not bother to ask. It makes no sense and there is little reason for them to fall into this strategy. You will get a laugh and a rejection. They expect every penny of a loan to be repaid, of course, that is the deal. Of course they may modify, but that is not the issue , debt reduction is the question and banks will not willingly participate in a unilateral reduction of debt to satisfy your cash flow requirements.

This same principal applies to any workout, however vendors or any non bank creditor may negotiate against themselves but here is a better way.

The best way to negotiate a discount of principle with a bank is with a specific bonafide offer in writing with a time  specific to close. This results in  a response and a resolution. This works.

There is much more required, more specific information, and an effective presentation, but the important point is a specific offer to compromise works a request to reduce does not.

 

Credit card debt does not go away…you must work them out

All of our clients have massive credit card debt. This we all understand. The banks are not lending to anyone, credit is a necessary mechanism used to support the peaks and valleys of cash flow, and bills must be paid.

Frequently credit cards act as the bank, providing the short term loans the banks should be providing but are no longer willing to. Further, there are many businesses which simply would not qualify for a loan, and thus credit cards are their only source of additional funding. Thus so many small business owners have enormous credit card balances with huge interest rates. I have clients with hundreds of thousands of dollars of credit card debt.

Here is the problem, despite the illusion that they are not secured, if unpaid long enough and not dealt with, the credit card companies will eventually go to court and get a judgment against you personally turning them into a secured loan. Worse, they also have the right to sue and recover from anyone using the card even if they have not signed for responsibility. It’s in the microscopic print that no one can read or understand.

The next issue is the workout. It can be done, some very easily others with extreme difficulty. Tougher cards like Advanta or American Express may be negotiated down to 50% at best with extreme effort, others can be more readily dropped to 35% down to 5-10%, although this too takes a significant effort.

Along the way you are harassed unmercifully by relentless collectors constantly disrupting your life making it impossible to ignore them.

The problem is having the adequate cash to pay them off even if they come down to their lowest settlement level.

Some cards will convert the reduced debt to a short payoff period, four months and others will demand immediate payment of the reduced balance as part of the agreement to settle. It is a large issue that requires a strategy and plan to work out successfully as they just do not go away.

The credit card workout companies do provide a valuable service, if you can afford them as they add their 15% of the gross credit card debt to the mix reducing the positive effect of the workout results. Sometimes the funding requirements of the credit card workout companies are too high to be supportable thus with large cedit card debt they are not a viable resource.

Our approach is different and is more user friendly and affordable with better results as the credit card companies tend to do a fair job but not the best job possible.

It is a serious issue for many and the cure is sometimes as rough as the problem, but it must be resolved. Give us a call, see what we have to say about it as we also understand that in most cases if your credit card debt is high and unsupportable, chances are very good that other debt issues are involved and thus a larger workout is required, resolving all the debt issues not just the cards.

You need a total resolution of all your debt issues not just one at a time.  call Norm at 413-584-2581 he will arrange a teleconference for us to discuss a plan to resolve your debt issues effectively and affordably.

 

Outselling your competition, when they have advantages over your product or service.

I was talking to a very wise  and successful friend, who just returned from a European sales support trip for his company, an IT business with some proprietary software, but in a very competitive environment. He competes with a few much larger companies that are very well supported in Europe successfully outselling his company with excellent products perceived as better in many ways..

I thought his approach was exceptional and clearly successful.

First of all he understands his competitors strengths and weaknesses extremely well, as well as he knows his own products.

He acknowledges what his competitors have successful products, that they do well in accomplishing stated goals and freely states his opinion regarding the strengths of his competitors to his clients.  He acknowledges they do a better job in some important situations.This creates credibility as it is honest and accurate and is what the potential client thinks anyways, so why bash the competition in this situation, it would make him look bad and he would lose his credibility reducing his effectiveness in selling. His self analysis.

So he acknowledges his competitors advantages, yet frequently out sells them by further understanding what his program does better then his competitors and thus if his advantages are what the client needs to solve a particular problem, despite the advantages of his competitors product. He out sells them by selling what his program does better while recognizing and acknowledging what his competitors strengths and weaknesses are. It makes sense, maybe this is obvious but I see this strategy infrequently implemented. He sells specific strengths he maintains are better then his competitors while acknowledging the strengths his competitors products have over his product.

So many salespeople simply believe in their products or services and right or wrong, sell blindly with the belief that their product is the best and everything else is inferior, whether it is true or not.

Successful salespeople are far more sophisticated then that, and customers are also far more knowledgeable . Selling stupidly will not work. Selling intelligently is a requirement. Understanding your competitions strengths and weaknesses is a fundamental requirement for success in today’s market, and acknowledging what they do well and yes what your product does better is the key to successfully selling against your competition.

Reconsider your approach and see if this strategy can benefit you. It is very powerful.

 

You must take risk to succeed.

It is unavoidable. A small businessman must accept risk as part of his life. There are no alternatives, no choices, no options. Risk is part of the very fiber of owning a small business and being a small business operator.

Some of you would like to be conservative, and being conservative is an acceptable philosophical position to maintain as your guideline for decision making. But lets be realistic, the very basic decision to be a small business owner and operator is the riskiest decision one could ever make, thus to make this basic commitment and then to hold tenaciously onto a conservative, no risk attitude is self defeating, unrealistic and basically unworkable.

Things happen every day in the world of small business operations which at its base require one to accept risk. Launching a new product is risky, hiring a new employee is risky, providing credit to customers is risky, signing leases and taking out loans with personal guaranty’s is risky, allowing your wife to sign a guaranty is insanely risky.

Being a small business owner is all about risk.

So what happens when things go wrong, cash flow declines and  debt service becomes impossible to service, and you want to get conservative and make bad decisions because you are afraid of risky strategies. You crash and burn.

You do not have the cash to make credit card payments, or service loans but are afraid to take the risk of default, so you prefer to tank your company by bleeding out the cash to service a note that you may only be able to support for a few more months before the end appears, the end of cash flow adequate to service your business needs. Then what? Then what happens to Mr. Conservative who was either afraid to pull the plug and shut down, or afraid to enter into a pre-emptive workout before the disaster destroys your business? What happens then?

Crash and burn is what. Nice decision Mr. Conservative. Fear won out, and risk took a back seat to logic.

TAKE THE RISK, MAKE A WORKOUT DECISION, AS SOON AS POSSIBLE. There will not be a clear path to follow, you may not know what will happen in the end or what your business and life will look like. But one thing is certain, if you do not take the risk of the unknown and enter into a workout scenario, your business will die a painful death. This is certain, but Mr. Conservative did not want to take the chance of walking head first into the unknown world of the workout and preferred to simply bleed to death knowingly and willingly, afraid to make the risky bu correct decision.

Makes no sense, but I hear it all the time, “I can’t default on purpose, I can’t reduce my payroll any further, I can’t do….it is too risky, I do not know the conclusion and cannot embark on a plan with no assurance of what will happen. I guess you would prefer to fail.

There are no guaranties in business. .. or in life for that mater, so why all of a sudden do the biggest risk takers of all, the small business owners,  in the face of obvious bone crushing debt, get conservative and not want to respond to the situation in a meaningful way, because there is risk and uncertainty and thus is above your  comfort level?

Apparently failure is preferable then risky salvation.

Let me break your bubble, you are all risk takers,  you cannot not change your context just because you are uncomfortable with the process. You must accept the reality that none of us are responsible  for nor could we have predicted the economic downturn we are confronting, but we are capable of dealing with the fallout and working out our debt so we can balance our new revenue projections and survive. Not to do this is an irresponsible act of self delusion and will result in self destruction…yet many of you are in the starting blocks  trapped by fear of the unknown.

You must take risk to succeed…have you forgotten this basic reality? Many of you  have.

 

SBA does it again, disaster loans are a disaster, another bad deal.

Disaster loans, Katrina, World Trade Center, hurricanes, earthquakes, what a wonderful service our government provides. Acknowledging when events occur that we are unable to control, acts of nature in particular, which have devastating effects on a, possibly wiped out,  portion of our community. They come to our rescue and offer emergency loans, to provide stability, salvation and even survival to the families and businesses severely effected by these disasters.

Its a good thing. People who are basically without homes, possessions, cash, clothes, etc, are given  the support they need to survive and re-emerge…hopefully. This is America.

Thank you government, it makes me proud to know that we take care of our own in a time of need. These are the types of services we need our government to provide and apparently they are meeting the need.

If only the story had a happy ending, we would all be satisfied, but as usual there is a tragic flaw in the story that needs reporting.

Here is the disaster part of the disaster loans.

Once again, you had best win and had better recover and had better make a profit and earn an income no matter how serious your disaster was because in the disaster loan program there is no Offer in Compromise program…there is no way to workout your loan if you fail to be able to recover and pay it back. That’s tough.

With a normal SBA loan there is an Offer in Compromise program and it is based upon  the clear need for compromise, recognizing the reality that many SBA guaranteed loans will default and the borrower will lose his business and his cash flow thus the SBA provides them with a back door to resolve their loans with a short payback plan called an Offer in Compromise program which allows a scheduled payback of less then what is owed. The SBA’s own guidelines allow reductions of up to 80% of the loan, and in many situations we have done better then that as the net liquidated value of the borrower may be unable to even handle that amount. So the SBA has a procedure and forms to request such benevolent treatment. Hallalujah SBA you got it right on this one, helping people who need the support you are providing, and when necessary to forgive some of the payback, even substantially all of it.

So what could be wrong with this plan, it sounds appropriate and the right thing for everyone involved?

Yes it is, EXCEPT for reasons that defy logic and challenge the credibility of the SBA, it appears that there is no Offer in Compromise program for disaster loans. So the people most needy, who are being provided assistance when confronted by a real disaster and have accepted money to survive, had better recover completely and profitably as the loan has no Offer in Compromise provisions and serious penalties for default.

Apparently, the SBA in their infinite wisdom believes it is ok for a defaulted business owner who borrowed with an SBA guaranty to receive Offer in Compromise support but a borrower of SBA funds for a disaster relief loan cannot apply for relief with a similar Offer in Compromise request.

It gets worse, the Department of Justice acts as the collection agency for the SBA and will jack interest rates on defaulted SBA disaster loans to as much as 42% annualized…!!!

So who is the predator now, offering low interest rates for disaster loans then when defaulting on the payback, burying them with insurmountable debt, crippling their opportunity to emerge and restart their lives…

What a benevolent administration we truly have. All I can say about this is shame on you SBA… what is your real mission? Who are you really serving and how is this being accomplished with such predatory practices. It seems the SBA is a shark wearing a  good guy disguise….watch out.

PS:  Because of our commitment and tenacity we penetrated the system and determined that while unadvertised, and basically denied, there is a path to debt forgiveness. The SBA apparently does not want to admit it or advertise it, or even acknowledge it exists when challenged. We uncovered it, a tough road to go, but the path is there. We will save a few more families from economic destruction, who are our clients…bu what happens to those who do not seek our help?

 

Yes the banks can be very incompetent.

We all complain about bank incompetency…we see it all the time.

There are many efficient, effective, focused, capable and workable banks and bankers…but oh so many more that are none of the above. It defies logic as to how some banks actually operate successfully or even open their doors for business every day.

Here is a terrific recent frustration story I have just experienced, it goes like this.

My client is totally underwater for millions, under siege by lenders, IRS and with a few judgments and more coming. Not employed and without remaining resources…as so many borrowers are.

He has two vehicles a few years old and has not made payment for a number of months. The bank is pushing for a repo and an auction which will of course result in large additional losses for the bank as well as costing them out of pocket expenses.

After working diligently for 6 weeks to satisfy the banks power of attorney requirements, we finally succeeded in accomplishing this monumental objective. I might add that after our forms were rejected we did use the banks forms and this also was rejected, amazing as that may seem, however after 6 weeks of discussion we worked this out. This is fairly frustrating on its own, yet it gets better, much better.

We have had  a buyer for the cars for two months willing to purchase at fair market value with a check in hand . I finally, after begging to talk with a supervisor for over a month, received a rejection and a counter offer for the exact amount owed  plus an additional few thousand for unpaid interest in arrears. In other words not one penny of compromise.  I have spent days seeking out someone to discuss this matter with and negotiate a reasonable workout and have failed miserably. Despite the fac tgat one of the vehicoes is a large SUV and the other a much older car.

We will turn over the cars to be auctioned which will result in massive losses and out of pocket expenditures well beyond what we could have derived from a ready, willing and able buyer at bluebook value.

I guess the bank would rather absorb greater losses and expenses then necessary. I guess they are unaware of their obligation to mitigate the borrowers losses. I guess they just do not get the reality of the situation, either that or they own a used car lot on the side.

One more chapter in a series of many silly banker stories.

No wonder the banks are in trouble and remain such, they still have not figured out what is going on and how to deal effectively in this current market.

 

The answer to the age old question, what does a salesman sell?

I recently learned something very valuable.  A good friend of mine proposed a solution to an age old question in a way I have not heard before…answering the often asked question, what does a salesman sell.

The typical answers being  it was service, or himself, the company, the product but these answers were not the answer my friend was proposing.

He leaned back after we all gave up, and said in a soft voice...trust.

A successful salesperson sells trust.

If he is successful in creating a trust relationahip, the product or service he represents goes along with  the trust. Trust is the cement that holds the client to the salesperson. Trust that his word is good, trust that his promises will be satisfied, that what he says about his product or service is reliable, that he delivers what he promises, when he promises it, and that it is as stated.

If problems occur he will stand behind his commitment. A good salesman understands that his word is worth far more then any sale and once trust is created it must be cherished, supported and nurtured and if done the next sale will always be waiting for him and competition will never succeed in  penetrating this relationship.

How true, how wise.

 

Why do banks resort to foreclosure auction, when it yields the lowest return?

This question  is often asked and infrequently answered. I hear the plea all the time, as business owners claim they can sell  assets for more then a foreclosure auction can yield, therefore reducing the debt for the borrower and the loss for the bank. Same with home, frequently auctioned for less then what the borrower was able to refinance for but never given a chance, thus losing the home.

Why this commitment to the foreclosure auction?

The concept has roots in the notion that if the collateral is widely advertised and offered to the whole market in a public forum then surely it must represent fair market value and thus a defensible process by the bank. It is just that, defensible even though it may yield the least and cost the most and take more time, it is considered  fair market value and thus the bank is fulfilling its fiduciary responsibility to the borrower and therefor doing he right thing. More importantly, it cannot be held liable for breaching its fiduciary responsibility to the borrower.

Another issue is the huge negative effect holding non performing loans on its books while the borrower attempts to market for a higher price, causing he bank to have to set aside   a sizable amount of cash to cover he anticipated loss, ad this wrecks havoc with its ability to loan and can result in action by the FDIC if the bank holds too many non performing loans, and  the sooner it can get rid of the loan and write off  the loss the better condition the bank is in. Holding a non performing loan is worse to the bank auditors then taking the loss and writing it off. The sooner the better so it does not have to be reported and accounted for.

Two important reasons the bank appear to be making the worse decision when from their position they are making the best decision possible.

 

New release on SBA Recovery Capital loans (ARC). Another silly SBA program.

 

Here they go again, another attempt to ‘do good” that misses the mark. Below see the outline of the help the SBA is offering small business owners. 

Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through a new loan program announced by Small Business Administration (SBA) Administrator Karen Mills. Beginning on June 15, the SBA will start guaranteeing America’s Recovery Capital (ARC) loans. ARC loans are deferred-payment loans as highlighted below.

• These short-term loans of up to $35,000 can be used to make up to six months of Principal and interest payments on qualifying loans for existing “viable” for-profit small businesses in the United States.
• Debt may include secured and unsecured conventional loans (mortgages, term and revolving lines of credit); capital leases; notes payable to vendors/suppliers/utilities; Development Company Loan Program (55504); first mortgage loans; credit card obligations; and loans made with an SBA guarantee after February 17, 2009.
• Loans have no SBA fees or interest costs for the borrower and are 100% guaranteed by the SBA.
• Loans will be disbursed within a period of six months, followed by 12 months of no repayment, and then five years to pay it back.
• ARC loans are for viable businesses, meaning that the business must have an established history of good performance, but are in a situation where they need extra help to bridge the “troubled waters”.
• Guaranteed Interest: SBA will pay monthly interest to lenders at “reasonable” rates throughout the term of the loan.
• The SBA expects to release detailed guidance for lender training by June 8.
• The SBA does not expect to be in a position to accept loan packages from lenders until June 15.

ARC loans will be made by commercial lenders, not SBA directly. 

Allow me to point out a few problems with this program which render it fairly useless.

1. What does viable mean?…an established history of good performance. Yet these loans are for ‘Small Business suffering financial hardship…’ which means they are not viable at the moment…       This is silly as any business in need of $35,000 to pay unpaid loan payments in arrears, the intended purpose and use,  cannot demonstrate “an established history of good performance”. In fact the point is that under this test, no small business in America who needs a loan to cover unpaid payments, the intended purpose of the loan, can show viability by their definition.

2.They eliminate any SBA loans made prior to Feb 2009!!!!!!!! So anyone with an older SBA loan, just about every outstanding SBA loan, cannot participate in the SBA program…Why ? I have no idea. But isn’t this silly? Discriminating against SBA borrowers in an SBA program?

3. For those SBA borrowers that do qualify it can not include interest and are 100% guaranteed by the SBA, this eliminates any possible participation by any newer loans. So what’s the point?

4. What are reasonable interest rates?  Why should this make a difference, who determines reasonable and what difference if the interest is high and deemed unreasonable the borrower is still in need of support.

My guess is that no more then a small handful of borrowers will qualify under these guidelines and for the remainder…no help at all.

Thank you again SBA another brilliant plan, that does very little to support our small business community.

When will you get it right?

 

I am Tweeting….follow me…lets see if this web 2.0 social networking thing works.

I have begun to do it,  Twitter : DonTodrin.

Follow me, lets see if this Web 2.0 thing works.

I have 23 followers, a week into it.  Check it out.

It’s addictive, fun to just write.  A challenge to say anything in so few words.  Tell me what you think.

I have my video flip camera, and am practicing before I go live on YouTube.  Facebook is in action.

It’s awesome, and I have yet to experience any measurable results.

The thought that I can ‘talk’ to potentially millions of people is very heady.

I hope it happens, I have a story to tell, fighting for the success of defaulting small business borrowers, one business a a time.

This is what the next wave is all about, web 2.0 creating social networks.

I am on it.

 

What can a bank do to liquidate collateral for a defaulted loan?

Typically and in most instances he banks hav e only one plan. Foreclose, take p;ossession and liquidate by auction. They have few options or alternatives. It is expensive as lawyers, auctioneers, advertising, insurance, storage, etc. must all be expensed while liquidating, which of course reduces the net gain to the bank from the process.

They can do little else. Of course coupled with this may be the liquidation of inventories , the sweeping of bank accounts, the collection of remaining accounts receivable and eventually moving onto the liquidation of personal assets such as your home under your personal guaranty. But it is most always liquidation by foreclosure auction.

There is one addditional option, which while usually played poorly by the banks, occasionaly works out and the borrower in defaut must be aware of this option, selling the business to another buyer.

Yes, recently the bank asked the borrower in default to continue to run the business, unhindered, while the bank searched for a buyer. The bank sought out assitance from a number of business brokers, and acually reached out to their own bank network of possible buyers searching for a buyer.

In this paricular example, the bank found a buyer making a very reasonable offer reducing the losses to both the bank and the borrower.

Is this good or bad for the defaulting borrower, hard to say, it’s good, as it does reduce the shortfall owed, its bad, as it remove the opportunity for a life saving workout, whch preserves the asses and provides a workout opportunity for the defaulting borrower. Typically in a foreclosure situation, the bank may be willing to workout a resolution which allows the business to continue in some form, if the bank attracts a sale, that ends this option, although reducing the debt.

Something to be aware of.

 

Not what you think they want… but what they need!

The marketplace is changing. Yes we are having a recession, and revenues are down everywhere we look. Unemployment is soaring and  millions cannot afford to spend a thing other then on necessities.

We do however make daily spending decisions, all of us. There are many who are doing well. There are many with disposable income who are making daily spending decisions differently they they ever have on the past. Now asking themselves if they need to purchase this item or not, even if they have more then enough money and income to warrant the purchase, the questions are being asked. People are changing their habits and spending less, more carefully and with specific purpose and  clear intent, as well as demanding a good price.

For the  first time in years more people are saving money, while others are facing record breaking foreclosures and the loss of their homes and jobs. All of which is resulting in less discretionary spending.

It is a confusing time.

The consumer must believe he or she is getting a good deal, or the wallet will not come out. Quality is vitally important, more so then ever, less is better and precision shopping,  as well as the perception of a good price…that’s the new equation.

Figure out how to interpret this for your product line or service for your market and success will return, revenues will appear and profit will be available.

Thus my tree service client, for example, is cutting dangerous limbs overhanging wires, roofs and walkways and fertilizing valuable trees, protecting the investment and adding cord wood to his revenue projections, even investing in machinery to support it.

My glass installer client is installing solar panels following the large investment made in his area by a significant stimulus package award for such innovation and new technology, and getting  him new innovative work.

No longer selling what they  believe the market ‘wants’ but what they determine  the market requires, needs, and then only at a reasonable price.

Likewise marketing tools are changing dramatically and rapidly with hard  traditional pounding advertising, print advertising, newspaper advertising falling by the wayside as social networking invades the media. Following what the market place is demanding not what the marketers think the consumer wants.

We are watching the collapse of the auto manufacturing industry  because they refused to make and sell what the marketplace told them they needed, thinking they new better what the consumer wanted…..wrong again, and look what happened.

The business world is changing,  the consumer is changing. Less is better, frivolousness and excess is out.

Figure out how to ride this new wave and get in front of your competition. With such radical change occurring  it is a hugely  opportunistic time with great rewards for effective entrepreneurism.

Its a new playing field and anyone who can adjust to the new rules can play and win.

Figure out how your business fits into this new paradigm, and then how to attract your customer base with new marketing tools. It is what the consumer wants…give it to them.

That’s today’s challenge

 

The Rule is: first secured priority wins… subordinate debt loses.

The rule is simple, everyone involved understands it, as it is the law of the land. In foreclosure The first secured note wins. This means the secured creditor which files its security interest first, in the public registries, be it a UCC security interest on inventory, equipment, receivables, or a mortgage on land or real estate, in foreclosure has priority.

This means the second filed priority interest, second by date of filing, must receive every dollar it is owed before the second filed secured interest gets its first dollar, and then when it is paid in full the third and then the fourth until the money is exhausted.

The unsecured creditors must wait until all the secured creditors are paid in full before the unsecured are paid at all.

This is the order of priority in payoff in a liquidation situation.

This also is the basis of much strategy, as it is easy to predict who will get what and thus the strategy and negotiation follows the order of priority as the recipient is weaker and weaker the lower priorities. his is part of the basis of a workout negotiation.

This also means the higher priority lien holders are supportive of your efforts for obvious reasons and can be very helpful in getting lower priority interests to cooperate.

This does not mean that lower priorities do not have enforceable debt, they do,  it simply means they may not be included in this distribution. It does mean however that the unsecured debt is typically noncollectable if the secured creditors do not get paid in full.

Of course keep in mind personally guaranteed debt is also considered secured, by the personal net worth of the guarantor, a weaker yet valid form of strengthening the unsecured position to the extent there is any net worth of the guarantor. Even if no net worth remains, there is still value of the personal guaranty as it remains until satisfied or discharged by negotiation.

This is very important and must be understood and evaluated in a workout situation, as any strategy must be built around these priorities.

 

I am doing it…twitting… web 2.0…follow me if you dare.

I am doing it:

Here is my twitter account name:     Don Todrin

I invite you to follow me, my friends all want the movie rights as they have heard the amazing adventures of  debt workouts. You will get an insight into the life and trauma of a bank  debt workout. The battle ground of small businesses all over the country as we fight for survival, interesting yes, absolutely.

Facebook and video,  youtube on the way…this is Web 2.0…I will report the results as we develop this platform for communicating  and make friends following our progress, social networking it’s called.

Follow me….  its a combination of an emotional roller coaster ride combined with high stakes poker and an insight into a little understood practice…if you can imagine. It is my life.

 

Launch of New England Branch of Second Wind, bank workout consulting business

Press release for immediate release

RE: LAUNCH OF NEW ENGLAND BRANCH OF SBA WORKOUT CONSULTANCY

Sunday, May 31, 2009

Hadley, MA.   In order to meet the increasing customer demand for secured bank debt workout consulting, Second Wind Consultants has launched a New England branch office in East Greenwich, RI.  Headed up by partner Sean Rosser, this office will service all of New England.

Second Wind Consultants is focused on helping small businesses that are struggling with overwhelming debt obligations.  The firm’s “Small Business Bailout Program™” is structured to assist small businesses by effectively re-organizing their assets, removing their secured debt, and thus allowing the business to operate unhindered by the weight of crushing debt, and then working out the personal guaranties. 

“This program works extremely well with SBA guaranteed debt and unpaid 941 payroll taxes, issues that are becoming more prevalent with the declining revenues most businesses are experiencing.  The program also allows the client to avoid the stigma and losses of bankruptcy”, says Rosser, “and I look forward to bringing these strategies to the New England market, as this recession is causing enormous damage to small business owners all over the region.  Not only does our plan work, there is no better option available for a small business owner facing financial ruin.”

Rosser, having confronted these issues as a previous client of Second Wind Consultants, was so impressed with the results of the Second Wind program that he applied for an opportunity to work with Second Wind and recently became a partner.

Prior to joining Second Wind Consultants, Sean was in private practice providing interim-CEO and business development services to clients in a broad range of industries including printing, consumer products, software, financial services, and manufacturing.

Sean received his MBA from Harvard Graduate School of Business, as well as a BS in Mechanical Engineering from the University of California, Berkeley.

 

SBA have you forgotten your mission…again?

I am losing faith.

I thought the SBA mission was all about supporting the small business owner. I am beginning to think other wise, as recent experience has indicated that they are on their own  alternative mission and have forgotten their purpose, and have lost their way. How unfortunate, it is a huge change in policy if this is what I am seeing, or perhaps its a few runaway renegade SBA decision makers. I am worried as decisions are made by committees to prevent such abnormal variances, but it seems I am seeing this alternative mission too often to ignore.

The current issue is the “…we will wait a few years and see how you fare then and will make demands down the line. If you have somehow recovered,  you may be worth more then. We will reject your Offer to Compromise now and wait….let’s see what happens in a few years.”

This is not the mission of the SBA. There own program, the Offer in Compromise program is intended to determine the “present net liquidated worth of the borrower and that is the determining factor of what is an acceptable Offer in Compromise.”

How does “net present liquidated worth compute to “…we will wait a few years and see what happens. We think you may be worth more down the line so we will leave the liens on and get back to you in the future, we can wait you out.’So in the end, the SBA is more aggressive and more willing to see the destruction of the borrower then the worst bank. In fact the banks would not be allowed to do this by the FDIC, upon review the bank would be required to liquidate the assets or workout the debt directly, they simply would not be allowed to simply wait and see what will happen a few years down the road. ..indefinitely if they get their way.

So the small business owner cannot refinance his home or even sell it, cannot borrow again, cannot do anything because the liens remain on himself and his home. This is an Offer in Compromise program” No its a retribution and punishment  program.

So lets see the score card. Recently a retired school teacher wiped out by Katrina was totally refused an Offer in Compromise with a full demand for repayment despite the impossibility of such. The latest response including the ‘we will wai for a few years and see what happens’, and then the new programs which include the Cobra support program, a great idea but not for small businesses with fewer then ten employees, and of course  the new emergency $35,000 program for borrowers in arrears on their debt service except not for SBA borrowers prior o he laws date…

What’s with the SBA? Are they now trying to eliminate the small business owner? Certainly sounds like it. Whats going on up there ? Is this the way we support small business owners? I don’t think so.

Fortunately for our client we fight this regressive attitude and with diligence, perseverance, tenacity and vision we overcome this bad behavior, but what about those we do not represent? What will happen to them? Apparently when you pay for the SBA guaranty, it is intended to help the banks, not you the small business owner.

Call if your stuck…413-584-2581 Norm will arrange for a no -obligation tele-conference to discuss your issues and provide strategies that will work.

 

Has the SBA completely lost their mind? I think so.

Presumably, the SBA exists to support the most important sector of our economy, the small business sector. While less visible, less powerful, and thus less newsworthy, they account for estimates of at least 70-75% of the employment in this country and certainly a gross dollar injection into our economy that is just as sizable.

Thus the Government has appropriately  deemed this sector worthy of special attention and support, and so the SBA guaranteed loan program was designed to support the capital requirements of the small business sector with loan guarantees, assuring the small business owner that he will be able to get the loan he needs to pursue the valuable small business dreams he has and thus employ people, pay taxes, and keep our economy rolling.

Just as clear is that as in any sector there will be a default ratio and possibly higher in the small business sector as many of these borrowers are more likely to face  high peaks and deep valleys in their evolution and thus high potential for default is a   reality.

In their infinite wisdom, the SBA has created an Offer in Compromise system to provide relief for personal guaranties to protect and  not wipe out the  commerce, families and homes that are so valuable  and important to our economy and society.

Presumably this Offer in Compromise program is designed to determine the net liquidated worth  of the borrower and design a payback program which accommodates a payback of what their net liquidated value may be. Thus the SBA gets a maximum return and the borrower lives to work another day…with his family intact and in the home they are working to pay off.

But apparently the system has its flaws and broke down recently as follows:

We support many SBA guaranteed loan borrowers who cannot afford to hire us, with our own non-profit program, designed to support those in need .

One client we have was running a family used auto parts business until Katrina wiped them out. They lost everything they had in the storm and have been working ever since to try and recover. They had trade debt, credit card debt, lines of credit and of course he SBA guaranteed loan of $75,000.

The wife is a retired school teacher and the husband now working fr $24,000 per year  as he was previously employed by the family business and is now working for what ever he can earn, instead of enjoying his retirement.

We have successfully worked out all his debt except for the SBA loan, which we applied for an Offer in Compromise as if ever there was an applicant worthy of support and assistance, this is the one.

They could afford very little, there home is totally upside down and they have nothing else other then this $24,000 annual income, barely enough to cover the mortgage and put food on the table…barely.

The offer was a $2500. payment to be paid out at the rate of $100. per month, also unaffordable but the best we could do.

Not only did the SBA refuse their offer, but they also counter offered as they typically do,  but this time with a demand for full payment all $75,000. !!!

Are they to rob a bank, print it in their basement, that remains flooded? Would the SBA prefer to force them into foreclosure and liquidate their home which is valued below their current mortgag and despite the fact that the SBA will incur costs but receive not one penny? Is this the plan? So it would seem…what choice remains for them.

So I ask the new director, what is the point of an Offer in Compromise program if this is the result?

What are you thinking Madam Director? Can we attend to this unimportant detail, the wiping out of families who have done their best only to be undone by Mother Nature and then destroyed by our benevolent government program with their Offer in Compromise program that has no respect for their own charging orders?

What’s the plan  now, support the half dozen banks and auto industry because their jobs are important but step on the small business sector who is responsible for 70% of the employment base because they are made up of small players with less power?

I guess this is what fairness and effective government is all about….

How sad.

Of course we will fight the battle and win for our client as we always do, but why is this a war? Why is this system not working better? What is happening to those who have not hired us? Do they simply lose their home, or remain indtebted for the remainder of their life? Is this the offer in Compromise program the SBA wants? I hope not, but unfortunately it is what it is and I write this letter from experience and first hand knowledgeso I now the truth.

Call us if you are having difficulties working our your loan, we have the fire power and the skill to assist, our clients get the results they need…even this one will.

Call for help. Norm will arrange a no obligation teleconference.413-584-2581

 

Protect your liquid assets, if you are in default take your name off your family accounts.

First, lets understand that if you are in default, have a personal guaranty,  your liquid assets are available for the taking by the defaulted bank. Especially bank accounts, insurance policy cash values, and other subtle catches of liquidity.

The best advice is to move all your accounts ou of the bank in which you are in default with. However an area that appears overlooked too often and caches defaulting borrowers more frequently then you would guess, when banks empty joint accounts, sometimes for the borrowers children, elderly parents, or any family member in need of such support and assistance.

Heartless you say, how could they do that? Easy, this is not about doing good, it has no moral aspect, there is no judgment made, it is about collateral, default and collection. They do what they must. Likewise we must defend as appropriate.

If you leave it available it will be taken.

 

The latest bank trick for landlords in default.

I have seen this twice this week, its a terrific move by the bank, certainly gets the borrowers attention and causes maximum damages to the borrower while supporting the banks recovery process , maybe.

Here is the deal:

The banks are now utilizing powers buried deeply within the documents you have already signed authorizing them to pull such maneuvers, and they send a letter to each tenant requesting (demanding) that rents be paid directly to the bank.

That’s a disaster for most borrowers who are depending upon the rents for many reasons. It’s also presumably  a bonanza for the bank as it allows them to recapture cash to apply to their account, the unpaid mortgage, so goes the theory.

Worse yet, what actually happens is the tenants pay no one as they interpret this to be an open opportunity for confusion, ‘I did not know who to pay’ they exclaim so they pay no one, so no one really wins in this strategy. Worse yet, everyone loses.

What to do about it, well, in both instances I was able to get the bank to write a letter releasing the tenants form paying the bank and redirect payments to the borrower. However the deal required the borrower making monthly payments going forward. In both instances the borrower felt his relationship with his tenants would result in their ignoring the banks letter and they would pay the borrower directly anyways, so the net result was it was a bust for the bank.

The evaluation was if there would be any net left over after the payment was made on the mortgage and in both instances there would be nothing left over as vacancies were high and rents were low, thus it was a total wash… so we did not enter into the agreement and the borrower collected the rents anyways while we worked out the conclusion with the bank based on our winning strategies

But it is a dangerous strategy and borrowers who own renatal property should be aware of these strategies.

Pay attention, workouts are a tricky business. Call if you need help. Norm will arrange a no obligation conference call. 413-584-2581

 

Locked onto the headlights of an oncoming truck….looming disaster.

It appears to me that the biggest obstacle preventing survival of small business owners in the eroding business market, this recession is their unwillingness to change the plan…they are, like the deer on the road locked onto the headlights of an oncoming truck, frozen and unable to move waiting pending doom.

This morning I spoke with a man who owns a home that is 90% finished and in pre- foreclosure. Based on our strategies we can buy it from the bank at half its long term value after fixing and then selling. This would yield an enormous amount of cash and free him to launch a different career, one that will work and provide him with adequate revenue for him and his family to live the life they want…but he cannot seem to get his arms around selling his home and moving on…stuck in the headlights of an oncoming truck and unable to make the life changing decision that will free him.

Others are afraid to sub contract and insist on manufacturing because they are comfortable with that equation and do not want to make the big change so will die a slow death of a thousand cuts, one cut at a time, as he lives from one payroll to another.

Closing the door altogether…moving on, selling the family jewels, downsizing, doing whatever it takes to get out of the way of the truck.

What difference does it really make what you do or how you get there its the goal that counts at the moment. Short term losses for long term gains, you all know these issues…but are so reluctant to step out of the way of the truck, frozen into into inaction.

Change, Change, Change. What choice do we have. If it ain’t working we must fix it even if it means moving to Kansas…

Whatever the success formula is, and we all have one tucked away that ‘would work’ but is languishing on the back burner because we do not want to make major life time changes we would rather simply hope for a better day, maybe the recession will end tomorrow, and maybe the big order will come in today.

It ain’t going to happen Bunky, so get with it we are all waiting and depending upon your making the right decision …now, your family especially and we are all watching you and wondering what you are going to do to fix this cash flow disaster and the answer is deep systemic changes…and your stuck in the headlights frozen, waiting for the truck to…

So yes it may mean a tough transition for a brief period of time, but planning can eliminate that hurdle, the real barrier is our personal reluctance to make the big decisions to do it differently or not do it at all. Change is the big objective. Fear is the barrier.

Clear thinking my friends, pretend you are your best friend. and he is asking you for help and wants advice on what he should do to get out of his situation. Give him advice, you know all the details. Tell him what to do and then DO IT.

We are smarter then the deer frozen by the oncoming headlights of a rapidly approaching truck…DO SOMETHING before it strikes, your family is depending on it, on you, on you making the right decision…now.

Call for help, 413-584-2581 you cannot do this successfully alone…Norm will set up a no obligation teleconference to discuss your options.

 

When challanged by overwhelming debt, like in sports, you have to put the ball in play for something to happen.

Its true, you have to put the ball into play for something to happen and it could be very good…you must play it out. Doing nothing is fatal.

Nothing happens if your not in play. Nothing.

How does this apply to a situation when you are drowning in debt, with reduced and  inadequate revenues. A workout strategy, of course,  what other option do you really have?….none that works as well.

A workout is part science and part art form. You do owe the debt. There is no defense only reality, the facts. You are in default and have signed personally. The bank cannot be forced into a compromise, and they have every  reason and the power to foreclose and liquidate your assets by auction.

Yet if we put the ball into play, or better stated engage in a workout strategy, good things will happen. In most instances we can predict  fairly accurately what will happen. However as with any complex situation with many uncontrollable factors  involved, it is impossible to predict with exact accuracy every time what the results of a workout will be.

I do however know one thing, that every workout negotiation we have ever entered into has resulted in a huge success. Some more so then others, but all workout successfully, as long as your expectations are reasonable and flexible.

Sometimes its a clutch home run in a late inning. Sometimes it’s a three pointer at the buzzer. Other times its a bunt, a walk or a stolen base…manufacturing  runs and a win…But in the end a Win is a Win, however we get there.

The point is, when being crushed by debt, your only viable plan of action is entering into a workout. One must believe and have faith. Trust your representative, your workout expert and watch him go to work.

No guaranties, but most assuredly you will be pleased because once we put the ball into play…we will score. We will win…we always do.

You have to put the ball into play to win for debt forgiveness to occur. It takes skill, experience and expertise…patience and determination, timing and subtlety, combined it yields a win. You can understand the principle, the concepts, the strategy and the numbers, it may make sense, but remember you signed the note, the bank lent you the money,you have personally guaranteed the debt, all is at risk, and they expect you to pay it back.

…and your expecting  the bank to forgive the debt?…it sounds silly. It is silly, it makes little sense when properly evaluated…but we believe in the workout and convince the banks to forgive the debt as it is in everyone’s best interest…amazing. We put the ball in play and good things happen. Not always predictable, but always a win.

It’s not normal business. It is as it is called ‘upside down, under water,’ It is part science part art form…find an artist, a workout artist and let him do his magic…it will work, he will put the ball  in play and find a way to win.

Call us for a candid discussion, 413-584-2581 Norm will arrange a no obligation teleconference, just an exchange of information and a view into what can happen if you put the ball into play.

Do it, what option do you have? Have faith. It will work out.

 

Should I start a new business in the middle of a recession? Of course!!!!!

Would I start a new business in the middle of a deep recession?

Absolutely, but very carefully; a very well planned and innovative business.  A business focused on the market’s realities, and delivering to that market exactly what it wants/needs…today.

Do a careful analysis of how the business model is typically being done, and then stream that model as much as possible.  Use fixed price sub contracts, rewrite leases and explore re-inventing your business model to yield a better product at lower volumes with higher profitability and controlled costs.

That’s the recipe.

Keep in mind the challenge for an existing business is learning how to downsize and reinvent themselves in order to work effectively in this recession, with decreased revenue and increased costs.

Its hugely different when one is starting up in such an environment as the business plan simply reflects the current situations, and thus the start up plan is set to win within the current parameters.

New businesses should have less a problem figuring out how to do it, operate profitably under current circumstances,  existing businesses have to change their ways and that is a lot tougher goal to accomplish.

Careful consideration of a lot of the competition remaining, businesses that are doing it the old way while trying to make this difficult transition, reacting by limiting their marketing efforts as they make their adjustments, and thus allowing the competition (you) to gain ground and claim a larger share of the market place; and allowing the new kid on the block to ‘beat up’ on the non-responsive, existing, old school businesses, who are hiding out -waiting for the black cloud to pass- and trying to figure out how to do it correctly in the down economy…while you hit the road running.

The glass is either half full or half empty and the results will follow the attitude.

The new guy looks at the current economy as today’s economy -not down -nor up -just what it is…and makes his plan accordingly.

Please!  Calling all entrepreneurs…open up… now, don’t let the current condition of the economy stop you.  There is a welcome and open door for innovation and better execution…come on in, the weather is great, the water is warm.  The profit potential is rich.

It’s a HUGE opportunity for those that know how to do it… correctly.

Call my office at 413-584-2581 if you need help, Norm will arrange a no obligation tele-conference for us to discuss your options.

 

Wake up SBA! The new Cobra supplement package should cover ALL small business employees.

COBRA was designed to give some employees who have lost their health insurance when they lose their jobs the option  to continue their former employer’s group health benefits for up to 18 months. It is named after the Consolidated Omnibus Budget Reconciliation Act of 1985, signed by President Ronald Reagan.

Those who elect COBRA have to pay the entire premium to continue their coverage until they are able to get a new job or get alternative health insurance,  expensive, especially if you have lost your job. As part of the Obama stimulus bill, employers now must subsidize up to 65% of their former employees’ COBRA premiums for up to nine months. The employer is reimbursed by the federal government through a payroll tax credit for its portion of the subsidy; the former employee pays the remaining 35%.

Unfortunately and for reasons that apparently have little logic or fairness at its root, the COBRA subsidy  applies only to small business owners who employ 20 or more workers and offer them health insurance benefits or this provision does not apply to you. Its hard to believe.

Also, in order for employees to qualify, they have to have been laid off. They don’t qualify if they were let go for  cause.

The subsidy applies to employees laid off between Sept. 1, 2008, and Dec. 31, 2009, and it ends when the  employee is offered employer-sponsored health-care coverage by a new employer; becomes eligible for Medicare; or when his COBRA coverage expires. The subsidy is not available to employees whose income is more than $125,000 a year or who have family annual income of more than $250,000.

Besides the increased paperwork and employee notification requirements,  the employer must collect the former employee’s 35% before he can claim the payroll tax credit. The small business owner has to go back and notify anybody who was involuntarily terminated. They have to be made aware they are eligible for this program.

Sounds like a reasonable although  quite a burdensome response to an admittedly  difficult and expensive issue, however, my greatest concern is what happens to the millions of small business employees who work for small  businesses with fewer then 20 employees? Why would they be excluded? What possible reason exists to differentiate between one worker and another merely because of the size of the employee pool that employed them? We all pay into the fund with similar taxes, why should some get greater benefits over others for such a silly reason?

So many of the less then 20 employee small businesses are getting hammered by this recession, I wonder again, what does the SBA believe its mission is, as it is apparently not yet understanding the width and depth and importance of the less then 20 employee small business sector, those who also need help  and are once again being excluded?

Wake up SBA! Have you forgotten your mission? Have you forgotten who the backbone of our workforce is? The small business under 20 employees, that is who keeps America running…why are you not supporting them?

Trade contracts supported by federal money routinely go to large businesses despite the small business requirements, the new $35,000 emergency loan is not for SBA borrowers, and now the Cobra support is denied those businesses under twenty employees.

Where is the help you promised us, SBA?

Where is the support we were told you would provide, Obama?

 

Let your customers determine your product mix and price points… not you.

It seems obvious doesn’t it? Let your customers determine what products, you stock and sell. How else would you approach your business, but not always so my friends. If you look around and ask yourself how did you originally go about determining what products you should sell and how do you continue to determine what mix to support?

Most of the time its ego, personal opinion and some vague idea as to what appears to be selling best or what you hear from your customers.

First of all within your business plan you must have determined what your typical client/customer profile will be. Thus helping you determine what price point  and product line to support. Is it to be high end or entry level? Once decided however are you excluding other options by pre-determining what you sell and thus what your customer profile will be. If you offer no entry level items in a high end store you will have no idea what the demand would be for such items and thus will have fixed the deal and the conclusion by limiting the choices in the beginning, self serving vanity.

TWO QUESTION T ASK AND MONITOR:

1. Have you asked your vendors what sells and what does not. They will certainly be a great help.

2. Ask your clients, monitor your sales, but be careful you are not fixing the answer by only providing one end of the spectrum and not the other. No balanced feedback or purchasing data.

Introduce new options frequently and see what happens, constant research is necessary to make certain you are on target with what the market wants and will purchase.

Provide a mix and see what happens. Let the market determine what you should support not the other way around.

Don’t decide what you want the answer to be, but truly what the market demands.

As well a broader cross section of price points and selection may provide the best set of alternative options as opposed to being either low end or high end…You cannot be everything to everybody, this is true, so you may have to make some hard decisions as to exactly who you will be serving, just make certain its a market driven decision.

 

Web 2.0: Blog, Twitter, Facebook, YouTube…Social networking!

Yes folks…its time to tweet on Twitter!

Make friends on Facebook and star on your own video or podcast on YouTube and on your web site.  I know, what language am I speaking?  What does this mean? Why should I be thinking about this? What’s the point?  What are the benefits?  What happens if I don’t do ‘it’, whatever ‘it’ is, this social networking thing?

It’s simple, just pay attention, follow directions and implement effectively and reap the benefits.

Your opinion about these concepts and your belief in its potential value is irrelevant.  You are just not yet aware, and in need of further enlightenment and instruction so you too will ‘get it’, as did I.

That’s the point of all this, …action, growth, development.

This whole thing is about how we, as a society, the world, are  changing our ways of communicating and therefore we are in need of new tools, new vehicles, a new context, a new way.  That new tool and new way of thinking, the new context is social networking, exchanging real thoughts and views and getting personal, the message comes along for the ride, it is not the main act…This is refreshing, new and very relevant.

Stop thinking how stupid it is and pay very close attention…this is where it’s at…investigate and do it.

You would be surprised how many are awakening to this new and changing reality, and yes let us be the leaders.

Millions upon millions of people in our society are tweeting, making friends on facebook and are watching video clips as well as reading blogs, far more then anyone ever imagined.

The revolution has happened, let’s usher in the changes.

Get on board.

To market effectively we must utilize effective business modes, tools, and vehicles for delivering our messages.

Right now social networking is the next wave.  Be early this time, stay ahead of your competition.  Grow and prosper in the face of a declining market place, take a share from your competitors. Social networking,  how to communicate effectively to the world…today. This is social networking.

You will see it here, I will demonstrate, as by the end of June, I will be posting a new look on my web site, a Web 2.0 look, as that is the technical jargon for what social networking is,  featuring all the above mentioned weird things…Twitter, Facebook, YouTube video and of course blogs which you are already aware of and comfortable with.

I will report what is happening.  Actually I will engage you in the process as soon as it is up and running.  You will all be the first to know, participate in, and learn with me, what works and what does not work.

Welcome aboard, lets go for the ride.

As I theorized when I  wrote and posted my first blog on WordPress, two years ago,  this will change the way I market and communicate….It did.  My entire marketing program is based on the sharing of valuable information, creating relationships,  social networking… sometimes resulting in a sale.

Now to the next level, creating a broader and deeper more dynamic and powerful social network, and then lets do something with it……..more to come.

Aaaaaaaaaall aboaaaaaaaaaaard!!!!!

 

Think twice, perhaps you should NOT attempt to preserve your business opportunity. In fact, get out while you can!

For many of our clients our objective is to preserve assets and strip off the debt. The idea of preserving assets is to provide a future opportunity for the business owner to buy back their business and continue on after reducing or eliminating the overall debt….yes very interesting, very attractive to many business owners who are buried under crushing debt and facing foreclosure. A successful debt workout plan can work well for many.

They are filled with optimism, if only they can rid themselves of debt,  waiting for the turnaround so they can re-emerge and re-establish their business position once again, purchasing back their business and continuing on…

A great plan for many….but one hidden tragic flaw.

What if the economy continues to tank, meltdown, self destruct? What if the recession lasts for allot longer then some think…years, many, maybe five, maybe more?

Maybe the best plan is to sell the assets and move on to to the next chapter of your life.

Think about it… We are emotionally attached to making our business work. Fulfilling the dream. Reaching our pre-determined goals that we have invested so much of our heart, soul, money and time into.

So blindly, completely focused and committed we run our selves, our finances, our families, into the turmoil of working ourselves endlessly to reach that elusive goal, business success.

This may be a good thing, there is nothing wrong with hard work and commitment to a goal, but if the goal is unlikely, or even impossible to reach or highly unlikely, we frequently still run into that wall daily, determined to make it work, no matter what it takes.

The true spirit of an entrepreneur.

I respect this attitude as it is the fuel of success. But there must be a mindful analysis, a scientific consideration, a business reason to fight the battles as if it is truly impossible or extremely unlikely,  why risk it all again?

Here is the deal. The economy is very sick. Unemployment is out of control, the housing sector is in a total meltdown, the financial sector is all but out of business, and on it goes. There will be greater erosion of our economy. There will be many more failures, defaults and foreclosures, many more.

Does it make sense to re-commit ourselves to a business that has already become a victim of this economic and business meltdown? If the economy is destined to decline further and then eventually bottom out languishing on the bottom for another long while and then the slow emergence out of this huge decline.

The question being, does it make any sense at all to seek out a second chance?

Even if the debt is removed from your business can it  operate successfully without the revenue it needs to succeed? Sure eliminating deb reduces the necessity for greater gross revenues, but can any business survive, even without debt service without the revenue the business requires?

Many more businesses will fail over the next number of years. Why fail twice?

Yes we can strip off the business debt. Yes we can reduce your personal guaranty to an affordable loss. Yes you can buy back the assets or the business again and make another run at it without the bone crushing debt.

If there is no revenue remaining even eliminating the debt will not convert a losing business to a winner.

Think twice, Your best plan may be to sell your business or business assets, enter into a debt relief program such as the strategy we provide, and then …do something else. Your business may not be the best vehicle possible for your future financial success.

Consider your options, maybe it is time for a major change.

 

Walk don’t run to greater success

We all know what we should be doing for our health, but for the most of us, while we may know what is the right thing to do, we seldom do it. We eat too much or the wrong things, we exercise to little or none at all, and we live with stress. We wonder why our friends are having heart attacks and contracting various medical issues. Of course we also believe it will never happen to us. But we seldom do what we should be doing to live healthy and protect ourselves and our families from big problems, us getting sick.

However since healthy living is not a habit many of us small business owners are committed to, too busy, I know. Consider the business benefits of the following, a particular healthy life style program, one we could all do and one that has a huge business benefit, as well as a just as huge health benefit…….walking.

The health benefits are well known so I will not bother to tell you what you already know, but the business benefits are seldom discussed or even recognized and this is the discovery I have recently made and want to share with you.

Walking is good for your business and will yield specific results very quickly that may be crucial to the survival and development of your business.

Here is why.

I have recently begun to walk…not to far at first but briskly, for a half hour, increasing to an hour by the end of he first week, enough to make a difference, enough to promote good health, but also enough to yield the business results I am interested in.

Its the zen thing.

It’s  quiet, no noise, no chatter, no interference, no one to talk to, no one to listen to, no music, no nothing, just walking, freeing your mind to think,  expand, travel, ponder, consider, resolve, contemplate, churn, in short, aimlessly wandering,  taking you where ever you may want to go or better yet where ever your mind may want to take you. Reaching conclusions, discovering answers, reviewing problems, considering alternatives, letting your mind do what it does best… work.

So in my walks, I find I solve problems, come to conclusions, discover new answers, and come back better prepared to confront my business day. It is possibly and frequently the most powerful moment of the day, when I experience a break through or discover an answer I was searching for and become confident in a decision I was contemplating. It is my own personal board of director meeting, with me and my mind in attendance.

It works, doing is believing. It is a moment of the day when you can effectively solve business problems.

One more benefit, it feels good, it relieves tension, it sets up the day on the right foot…and yes it is healthy and provides may health benefits.

Walk, don’t run to success and better health. Its a huge benefit for your business life as well as your personal health.

Do it.

 

Be careful banks are shortening their default requirements for SBA guaranteed loans in default.

To date, the general benchmark for banks to call SBA guaranteed loans in payment default has been 90 days, at which time the festivities begin in earnest. The lawyers are engaged, the note is deemed in default and called and the liquidation of collateral by foreclosure and auction begins.

Keeping in mind that the banks guaranty from the SBA is dependent upon their exhausting their legal remedies to liquidate collateral when the borrower is in default.

Once the process begins there is no talking to them, only responding to the legal process which leaves you little room to change their course of direction.

We  have a strategy which does change this process dramatically, however it is best initiated prior to the implementation of foreclosure although  not fatal to our plan if foreclosure is initiated.

The real point here is however that the new reality is the banks are now ratcheting up the default point. Some banks now  consider 90 days too long to wait and in one instance we experienced recently a bank began their process  a mere fifteen days after failure to pay a monthly installment. Fifteen days!!!

The leash is shortening which means you must respond far more quickly to their assault or when you wake one morning shortly after failing to pay  you may find your business assets in the liquidation process, facing foreclosure.

This is not universal yet, although I am beginning to see this pop up more and more and I anticipate it being a growing trend.

There is still a process to unfold requiring photographing assets, appraisals, and making demand etc. However the banks are beginning to awaken to the many months  being wasted while nothing happens including debt service payments from the borrower and the banks are beginning to eliminate this spread of non action.

Do not be lulled into complacency, expecting many months to unwind while nothing is being done, those days appear to be passing quickly and you can now expect the assault will begin almost immediately, so it appears.

The lesson is, since you know well in advance that you will soon be defaulting, it behooves you to make plans in advance, determine exactly how you are going to deal with the foreclosure and liquidation process and of course the resulting personal guaranty attack.

When you come up with ‘no plan’ call us immediately, we can save your personal and business assets from foreclosure and liquidation.

Call  Norm at 413-584-2581…he will arrange a no obligation teleconference, were we can discuss your options.

 

American Small Business League, fighting our battle.

A letter from Lloyd Chapman, President of  American Small Business League. He says it quite clearly, do something about this, check out their web site, become active and vocal, its small business and your country at stake. 

Do these companies sound like small businesses to you? Halliburton, Rolls-Royce, Wal-Mart, Home Depot, John Deere, Dell Computer, Xerox, Sherwin-Williams, and British Aerospace (BAE). How about Buhrmann NV in Amsterdam with 26,000 employees worldwide?

These are just a few of the thousands of corporate giants from around the world that your administration is giving billions of dollars a month in government small business contracts to.

Since 2003, there have been over a dozen federal investigations that found Fortune 500 firms and thousands of large businesses are receiving government small business contracts. The Small Business Administration (SBA) Office of Inspector General described the magnitude of this problem very eloquently in report 5-15. The report states, “One of the most important challenges facing the Small Business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.”

When you were running for president, you seemed to understand the staggering negative impact this problem was having on our economy.

Let me remind you of what you said during the campaign, “98 percent of all American companies have fewer than 100 employees. Over half of all Americans work for a small business. Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.”

You were absolutely right, small businesses are the backbone of our nation’s economy. In fact, according to the latest statistics from the U.S. Census Bureau, small businesses with less than 100 employees create over 97 percent of all new jobs in America.

Nobel Prize winning economist Paul Krugman said your economic policies are almost certain to fail, and they are, “more than disappointing. In fact, it fills me with a sense of despair.” Ditto for me.

Allowing Fortune 500 firms to participate in economic stimulus programs for small businesses, especially during a recession, is absolutely moronic and asinine. How in the world do you expect to create jobs and stimulate the economy if you won’t even stop the diversion of billions of dollars in federal small business contracts away from the middle class firms that create 97 percent of all new jobs in this country?

Here is my suggestion, why don’t you do what you said you would do during the campaign and stop giving federal small business contracts to “corporate giants”? I even have a way you can accomplish that at no additional cost to the taxpayers. I have written legislation titled the “Fairness and Transparency in Contracting Act.” It is based on one of the most foundational principals of the original Small Business Act of 1953, which states that a small business must be “independently owned.” My lawyers all tell me that would clearly exclude publicly traded firms. The Fairness and Transparency in Contracting Act simply says, the federal government can no longer report awards to publicly traded companies and their subsidiaries as small business awards. Tah Dah, no more small business contracts going to “corporate giants.”

Your economic stimulus plan calls for $111 billion in infrastructure spending this year. My guess is about 90 percent of that money will go to big businesses. I don’t know if anyone has told you this, but big businesses in America have not created one net new job since 1977.

With my plan, you simply stop giving government SMALL BUSINESS CONTRACTS on existing infrastructure spending to “CORPORATE GIANTS.” I have won several Freedom of Information Act cases against the government and I have tons of data that indicates around $100 billion a year in federal small business contracts are being diverted to big businesses. Ask Paul Krugman, or one of your top economic advisors like Dr. Laura Tyson, if you can create any new jobs and stimulate the national economy by redirecting $100 billion a year in current federal infrastructure spending to the middle class firms that create over 97 percent of all new jobs in America.

$100 billion a year, year-after-year, redirected to the American small businesses that create 97 percent of all new jobs, using the original congressional intent of a 55-year-old economic stimulus program called the Small Business Act. Did I mention that it’s free to the taxpayers? What’s not to love?

P.S. How about a quick executive order, and we can get this economy back on track pronto?

Sincerely,
Lloyd Chapman
President, American Small Business League

 

We will fly you in to meet us.

Yes we will…

It’s called our     “Fly me in, I want to meet you program.”

We do business all over the USA.  Our work is unique and in great demand and our record of success is unprecedented.  Yet  for the most part we do business over the phone and via email etc.

We  have the best small business bail out program available anywhere and it works!  You can ask our references, but we miss not being able to meet with you in person during the early stages of our program.

Our clients always want to meet, talk and get to know us, as well as have the opportunity to create a more meaningful and personal relationship.  I don’t blame them at all, I would want to achieve that as well.

After all, your financial and business life is at extreme risk, even catastrophic risk, and we may be your savior.  We should get to know each other.

So yes, We’ll fly you in to meet us.

Where to? Hartford Connecticut, Bradley International Airport…and for all you non New Englanders, there’s a great restaurant a few miles from the airport that serves up HUGE lobsters…3 pounders, the only way to go.  So we can saddle up a few, wash them down a beer and figure it all out…civilly, together, in person.

Call for details.  Plan on it.  In during the afternoon, stay overnight and out the next morning.  Easy, and the air fare and dinner are on us.

Call my office at 413-584-2581 Norm will set us up with a no obligation conference call to discuss your situation and give you some options to consider.  We have the way out of your ’situation’.

If it feels right and we both want to proceed…

We’ll fly you in to meet us, we’d like to meet you too.

 

Something good is happening at the SBA. Offers in Compromise are being turned around much more quickly!

I believe we are experiencing change at the SBA…and that is good change. We are being told by banks all over the USA that the SBA is responding in record time, in some cases weeks. Wow, wouldn’t that be nice, a rapid response, a  fair conclusion and then on with your lives.

Historically it has taken close to a year to get a response back from the SBA, with all that time simply waiting for ones turn to come up. It is well known that under the Bush presidency, he allowed the SBA workforce to be reduced by approximately 30%. It is also promised that under Obama the workforce will be restored  to its full requirements which may be greater then the previous reduction of 30%. It is entirely possible that this is the reason we are experiencing such rapid responses from them…It is good news.

I cannot tell yet whether they are becoming increasingly sympathetic and reasonable accepting the Offers in Compromise more willingly. I am hopeful but it is too early to tell that.

I have quite a few in the pipeline and am waiting response, I shall soon know if the turnaround is faster and if the acceptance is more generous. I will report directly.

 

Your small business survival can hinge on which bill you pay, and it is not the ones you think!

Written by Sean Rosser, partner, past client, and New England representative.

As business owners, we all appreciate staying on top of our bills.  There is a sense of comfort and calm when the phone isn’t ringing off the hook with creditors and vendors looking for payments.  We are confident that if we need inventory, we can just order it without worry about past due accounts.   It reassures our sense that we are good managers and business people.

However, in recessionary times like we are experiencing, many business owners are faced with impossible decisions when it comes to paying the bills…sales are down, receivables are up, credit is tapped out, and cash flow is tight, tight, tight.

So which bills do you pay, and which do you ignore?

Usually the decision comes down to three competing uses for the cash available.  They are, in no particular order:

1) Pay the vendors. 2) Pay myself, or,  3) Pay my bank loan.

The first decision is easy, and every business owner I’ve met makes the same decision.  The first thing to go is their own personal salary.  They cut it to the bone – sometimes into the bone – in an effort to save the business.  This first decision is easy to make, and is the correct decision.  However, in the current economic situation, that may not be enough.  After cutting their own salary, things get less clear, especially when the bank loans are personally guaranteed, as in the case of a SBA loan.

With an SBA loan, it is personally guaranteed (PG), typically by the business owner’s personal home.  These PGs have a way of focusing the mind when it comes to paying bills, something along the lines of “if I don’t pay the bank, they will take my house.”   And many bank loans are secured by the assets of the business, whereas vendor debt is unsecured.  So legally, the bank has first claim on the businesses assets, and so it follows that they should be paid first, right?

And so the trouble begins.

Business owners faced with this dilemma frequently swallow hard, pay the bank, and start to do the “A/P shuffle”.   This particular dance involves juggling your accounts payable, stretching out non-essential vendors, and even finding new vendors to replace old ones that have put you on credit hold.   The business owner spends hours hunkered down with the bookkeeper, trying to figure out, “Who do I pay this week?  Will that key vendor accept a partial payment in exchange for releasing that critical shipment?”

Sometimes this strategy works.  But usually it just delays the hard decisions, and eventually the business chokes on a mounting pile of vendor debt, and when it becomes critical, when the vendors get so frustrated that they call their lawyers, the business owner starts to contemplate the unthinkable – bankruptcy.

When I speak to a business owner, whether they are already in this situation or heading into this situation, I always hammer home the point that the most valuable thing they control in their business is the cash flow stream it generates, and that in tough times, it is absolutely critical to do everything possible to protect that cash flow, and having good vendor relationships and manageable vendor A/P is critical to maintaining this cash flow.

So…ignore your bank.  Pay your vendors.  Keep the business as healthy as possible.

What!?  But the bank will foreclose on the business!  They will take my house!

Possible.  But not likely.

Banks are aware of the critical nature of cash flow and the fact that if the business fails, their ability to be repaid goes down the tubes.  That’s not good for them or you.  However, you can’t actually ignore them, but you can usually get them to work with you, if you approach them in the right way.  So, call your bank, and explain that you need them to be flexible and work with you.  Put together a plan which demonstrates to them how flexibility on their part will allow you to survive, and hopefully thrive, and live to pay off the loan.

You will be surprised at how receptive most banks are to a well thought out plan.

Now, in some cases, the economic situation facing the business is such that even with the bank’s flexibility, the business can’t survive in it’s current form.  In these cases, a restructuring maybe necessary which reorganizes the company’s balance sheet – cleaning off unnecessary debt and A/P, and allows the business to emerge as a new entity.  

This restructuring can be done in the bankruptcy courts, or via a careful plan outside of the courts (that’s what we do here at Second Wind Consultants).  Whichever plan you decide to pursue at this point, it will require an SBA workout strategy to deal with your personal guarantees, and can be difficult and painful.  But sometimes it the only choice.

If you want to talk about your particular situation, please feel free to call Norm at 413-584-2581 to set a no obligation tele-conference call.  We can discuss a strategy that will work for you.

 

Yes, it is going to get worse, further erosion of small business credit…prepare.

The following post is in part extracted from Mish’s Global Economic Trend Analysis.

For small business owners, a line of credit can be a lifesaver, giving them a buffer against cash-flow problems and enabling them to handle regular expenses such as payroll. But beginning in March, according to documents obtained by BusinessWeek, JPMorgan Chase suspended credit lines for a large number of business owners. According to someone familiar with the matter, the move affected thousands of businesses. They had been clients of Washington Mutual before Chase bought the ailing bank in September 2008. The documents show that Chase tasked a special group inside the bank with responding to inquiries from borrowers.

If business owners can’t convince Chase of their creditworthiness, they have three options: 1) pay off the balance in full; 2) agree to a conversion of the line of credit into a term loan; or 3) go into default.

Thomas Kelly, a spokesman for Chase, says the bank continually reviews the lines of credit in its portfolio. “We contact customers if we determine there has been an adverse change in their financial condition or credit history. We may eliminate the unused portion of their credit line and set up a standard repayment plan.” He says the bank has assigned staff to work with customers who want such decisions reexamined.

The phenomenon may extend well beyond Chase and its borrowers. The increased aggressiveness on the part of lenders may be due in part to banks now being in possession of 2008 tax returns for most of their clients, which show the full ugliness of the last quarter of 2008.

And suspending lines of credit is certainly an efficient way to reduce the risk on a bank’s balance sheet. According to officials at the Office of the Comptroller of the Currency, bank reserves for bad loans are based on the total exposure to a customer. So if a bank has a $100,000 line of credit with a small firm and only $20,000 is drawn down, the total exposure is still $100,000, and the bank usually will reserve for loan losses based on that amount. But if they convert the $20,000 outstanding to a term loan and cancel the line of credit, or if they simply cut the line to $20,000, the reserves would be based on that $20,000 figure.

Regulatory pressure likely plays a part as well. The White House and Treasury talk about the need for lending to small business, local bank examiners continue to pressure them to upgrade the quality of their loan portfolios.

“You have a disconnect between what policymakers are saying and what the  bank examiners and supervisors are saying,” Ely says. That has painful repercussions for business owners around the country.

It is the next shoe to drop…small business will be tested again, and with widespread reductions in revenue, a withdrawal of existing credit lines and a demand to pay them off will result in huge additional pressure on already challenged  small businesses.

A business confronting this issue must consider a pre-emptive workout, saving assets and the business and reducing debt so the business may operate above break even.

Call Norm at my office,  he will arrange a no obligation tele-conference for us to discuss your options. 413-584-2581

 

Signs of love from the SBA on the workout side…but it won’t work, it’s the wrong answer.

Wow, I an amazed, it is happening… a little. I see evidence of the SBA  allowing a slight improvement in workout terms and conditions, being more generous with interest and deferment. Even lengthening the term appears possible, it appears to be dependent upon the cooperation and support of the banker handling the loan. But it is happening…a little.

Here is my take. What difference does it make, loan modification, no matter how attractive, is still putting a band-aide on a cancer. It won’t work. It simply removes more cash from the borrowers business with liquidation still on the horizon.

Reality is, revenues are down, so how ever you do adjust the loan terms and conditions are irrelevant as the only adjustment that would mean anything is the reduction of principal . That is a workout I can support.

Just because the bank will give you 3.5% interest for 9 months and allow you to pay interest only, a very sweet deal, does not mean your problems are solved. In 9 months when full debt service returns it will be as crushing as it was when you previously  stopped paying.

Reduced revenues require reduced debt. That is the only truth. The only way to survive.

No debt is best, that really covers any reduction of revenues. No debt allows you to adjust more widely  to market conditions and allows you to operate at levels impossible before. Who can predict how low revenues will drop and for how long?

Stripping the debt off the business is exactly what is needed. That is the answer, not modification, no mater what it may look like.

Call me for a no obligation tele-conference to discuss how this could work for you. 413-584-2581 ask for Norm. He will arrange it.

 

America’s love affair with malls is over.. break your lease. Get out now.

Attention all you retailers, in malls all over the country, who are paying incredibly high rents, and are still hit with additional common area charges and ad budgets that are required by the mall owners, need to understand what is happening and you need to make some hard decisions NOW.

Simply stated…GET OUT NOW…before all is lost.  America’s love affair with malls is over.

The deal was, huge foot traffic, resulting in lots of  spending, thus supporting a very high overhead.  It worked for many years, and mall locations were a good place to be.  No longer!…and it will  not return.

Why?

1. Huge unemployment, and shrinking disposable income; this situation will remain, and will get worse for a long time to come.

2. Reduction in stock values, and in home equity has destroyed the baby boomers hopes of a comfortable retirement; this realization has resulted in their shutting off their spending spigot.  This most important well has ‘gone dry’ and will not return.

3. Credit cards are being shut off, or no longer used.

4. Perhaps most important of all is a systemic switch to frugality.  ‘Shop ’til you drop’ is no longer in vogue, frugality is in.  Impulse spending is out, even for those who have jobs, credit and cash.  It’s over.

5, Commercial vacancies are at record setting levels in malls all over the country and are destined to expand dramatically as more and more retail stores go broke and close, including many national chains and many anchor stores, which were depended upon to stimulate the valuable and important ‘foot traffic’, which is reflected in… your rent.

It’s over, and the longer you stay put and pay the exorbitant rents and added charges the faster your revenues and profitability will be drained, forcing you out of business without an exit strategy available.

My advice is bail out now while you still have a chance.  

Call my office if you’d like to get some immediate help.  We always offer a no cost or obligation initial consultation and you will certainly need a debt workout plan.  We can help you.

Call Norm at 413-584-2581, he will arrange a tele-conference for us to discuss your options.

 

Seller financing has two hidden advantages, besides it may be the only way to purchase and sell a business.

Seller financing seems to be a stick in the eye for the seller, it’s exactly what he did not want to do.  He was looking for, expecting and deserving, the big hit, a hit capable of changing his life dramatically…a final payoff for an enormous work effort.

Unfortunately there are far fewer buyers in this difficult economy, and few banks that are willing to take on a commercial risk and lend.  So if there is a willing buyer, and a willing seller, then seller financing may be the only way to accomplish the goals.

There is however, a benefit for the seller, and here is how it works:

If the buyer steps into the sellers LLC, becomes the managing director, while leaving the previous owners on as members, the following can be accomplished.

The buyers can possibly refinance the business easier then acquiring bank financing and thus the original owners receive the refinancing benefit and the new owners pay the debt…. with the old owners financing the portion that could not be refinanced, a partial win.

Alternatively, if this cannot be accomplished, perhaps the old owners have to take on being the bank for the entire deal.  The previous owners receive weekly or monthly distributions from the LLC and therefore -while taxed as income- the significant capital gains tax can can be avoided altogether.

That can be a huge savings and a valuable enticement to do seller financing.

This is not the preferred way, but in the current economic environment it may be the only way and at least there is a huge uptick in the results because of this.

Another benefit is the interest rate.  In today’s investment world, an enjoyable return on ones investment is hard to come by.  The stock market is in trouble, real estate is tanking; so where can one get a fair return on their investment  capital?  Owner financing!

If the seller’s take back note carries an 8-10% interest rate, the seller can enjoy a nice return on the note…better then anywhere else.  Thus the long term return based on avoiding the capital gains tax and further enjoying the increased interest rate are at least two benefits to support owner financing.  These can account for a very enhanced return and are thus worthy of serious consideration, besides which, what alternatives does one have? The banks are for all practical purposes out of ‘business’.

 

Going concern value…a mystical concept, when the business is not profitable.

Why would a bank demand more then the appraised value of the assets in a workout liquidation situation?

Its easy to say the bank is being greedy, obnoxious, over reaching, unfair etc. and while this may also be true, frequently there is some merit to their demand.

It is not just to get more…

But you say, as I have many times, it is what it is, the asset value as appraised by an appraiser, should be what it is worth and thus the bank should be held to collect that amount or if it believes the appraisal is unreasonably low, then the remedy is foreclosure and liquidation by auction by the bank, not demanding more then the assets are worth.

It unfortunately is not always that easy or clear. First of all market value is not the benchmark as the property can only be liquidated by foreclosure thus the issue is liquidated value not fair market value.

Sometimes the bank will be working off fair market value when in reality they should be using liquidation value as the benchmark, however that also is not the issue I am getting to.

The  real issue I am occasionally forced to reckon with is the ‘going concern’ issue. This is the 800 lb. gorilla in the room.

The banks argue that there is inherent value in a going concern. Even though the lease hold improvements belong to the landlord when in default, the bank arguesj that the business is continuous, the lease hold improvements are being used by the business, the employees are in place, the cash flow continues, the sales are continuous, and thus the inherent value of the ‘going concern’ is greater then the value of the assets as appraised.

Are they correct?

A tough  call. I argue that as per  standard accounting procedures a business that is losing money is only worth the value of the assets, but in this situation the bank argues its worth more as a going concern. Are they correct? I do not believe they are, but if the bank believes it, it will likely cost a few thousand more then the assets are worth.

There is nothing left to discuss with the bank if they are stuck on this point other then to either go along with their demand or call their bluff, leave your offer on the table and walk away.

So yes, clients have  been forced to pay more then the value of the assets in a liquidation situation because of the going concern argument.

When this occurs…argue your best and accept the results. The bigger more important battle ground is the personal guaranty, that’s were the workout is won or lost. A few thousand more or less on the asset sale is never a deal breaker.

 

The banks and credit card industry are busy taking all our rights away.

I have recently written about the effort credit card companies and banks extend to limit the rights of the borrowers to work out their debts. The issue I have been discussing recently is their unwillingness to negotiate with third party representatives, a policy designed to reduce the professional representation of borrowers and therefore allowing the banks and credit card companies an easier path to intimidate and beat up their borrowers.

I believe such a policy is outrageous and an outright denial of a basic right for a person or business to determine their own representation. How dare the credit card companies and banks decide that they have a right to determine who and how borrowers want to be represented in such workout negotiations. Everyone, every borrower should have the right to appoint any one they choose with the power of attorney to represent their best interests, irrespective of what their credentials may be.

The reason is obvious, borrowers do not know their rights or the practice of debt workout strategies and thus if the creditors manage to knock out the professionals they will achieve a greater return…But what about the borrowers rights?…I guess this is not an issue the creditors are concerned with at all. They will do anything hey can to collect.

There are many excellent debt workout professionals practicing in this country and this policy pays tribute to their skill and capability to effectively represent the borrower. What a low blow by these creditors to simply deny the borrowers the right to select them as their representative appointing them with power of attorney in a debt workout situation.

In researching this issue I have further discovered that the lobbyists hired by the banks and credit card companies have successfully mandated this policy into public law in ten sates denying borrowers the right to negotiate credit issues by appointing skilled specialists with power of attorney.

Third party representation, has been severely limited and restricted to attorneys only. Nice job lobbyists, there goes another right down the tube. In these states we no longer have the right to select our own representatives unless they are attorneys.  What a waste of talent and a huge cost to the borrowers and another barrier to the borrower achieving a just resolution.

Here are the states:  Colorado, Delaware, Georgia, Idaho, Kansas, North Carolina, New Jersey, Rhode Island, South Carolina, Utah, West Virginia, and Wisconsin.

These states have regulations that prohibit third party credit settlement. Another indication of the erosion of our free society going down the drain…

 

If you can’t pay…don’t!

Houston, we have a problem!

People are mixing moral attitude with business decisions and while there may be a time and a place for this moral issue to be discussed and even incorporated in your business life, one thing is for certain…business debt is not a moral issue or decision when you do not have the cash. Its a reality and default is not a sin its a part of business.

If you can’t pay…don’t. Its that simple.

I understand, everyone wants to pay their bills. Of course.

Everyone believes they should pay their bills, it’s perceived as a measuring stick of ones character they say! I do not think this is the case. Its a measuring stick of how large your check book is. How much cash you can control and what  your priorities are in utilizing that cash?

If your business is in trouble, revenues down, overhead crushing you, debt killing you, and you have some cash flow, I see many business owners juggling their revenues for the benefit of paying as many bills as they can…before they crash and burn completely.

NO NO NO I say, we must stop this, as it is not the right path, despite our deep belief that we should pay our bills, the question really is do we have an option here. if there is inadequate capital and the business is declining then not paying your bills may not be a decision it may simply be a reality, if we can’t, we can’t.

If you see the handwriting on the wall which is easy, its when you cannot pay all your bills and your revenue has declined, what is the point of paying any of them? What difference is it if you pay this month and fail next month? Perhaps you should be considering other priorities like your family, your home, your other options…maybe you should be thinking of an exit strategy, a workout plan, a new business opportunity.

But so many in this situation, do everything possible to pay the business bills, with a check book too small to suffice.

Whats the point? Why do we do this? What does it get anyone? One more payment, is that the goal, to die trying is that the objective so somehow we can say we did our best???

I do not think so at all. Doing our best does not require us to commit suicide. It does not require us to put our family below the importance of a creditor, it does not require us to lose our home as opposed to paying the telephone bill or the bank.

Remember business issues are just that, business issues, profit motivated and a two way relationship. We must stop taking full responsibility for the outcome, our creditors are part of this deal, they extended credit and therefore accepted he risk of failure. Did we sign on saying we would kill ourselves and our family to pay the bill for one more month. I do not think so.

I am not saying we should lie, cheat, and steal from our creditors, not at all, if we bought something we should pay, if we can. But I am saying when we can’t pay we need to recognize this reality and make broad based decisions including who to pay, when to stop paying and what to do with the cash that is available…and I further believe that this decision does not start and end with dedicating 100% of your cash availability to paying down business debt until there is nothing left and you and your family and your employees are out on the street. NO.

There are more responsible decisions to be made. Paying til you drop is all about ego, satisfying your self perception that you can and will pay your bills or die trying. Silly.

One simple rule, If you cannot pay…do not. You need a plan , a workout, but not a pay till you drop attitude, that’s plain foolish.

Loose the self importance, the ‘this is what I must do’ attitude, its silly and you have bigger obligations to consider. Being responsible is not about running into a burning house to save some artifacts and finding yourself in the hospital burned to a crisp…No its about letting the house burn down and saving your family, life and other important aspects, all more important then the things. The creditors will find a way to survive, you will not.

If you can’t pay the bills…don’t.

It is a measuring stick …of maturity and appropriate decision making, …character.

 

Have you figured out how to increase revenue during this recession? Train others the way and earn double.

It’s a recession, so what, I say. The basic rules still remain the same, the way to proceed, just under different circumstances. This does not mean we must give up and wait for it to pass, whenever that may be, it does mean we must learn to market successfully and cost efficiently in a changing economy, were revenues are down. We must  do everything required in order to not only survive but also to grow and expand. What else?

Some of you get it and are doing well, despite the tough business atmosphere. Others are locked in  the headlights of an oncoming train, waiting to be run over.

Those that get it could consider helping those who are stuck…and make a profit for both.

My good friends at Ink Solutions are once again leading the way and showing us all how to grow and develop in this difficult economic time. This time however I believe they are not only offering a valuable service but are also demonstrating a path to success that may be applicable to others who have figured out how to succeed in this dire time.

Ink Solutions is offering a short hands on training program for others in the ink business showing them how to market successfully on a very tight budget, a program that has helped them continue to grow and develop during this down turned business environment.

What a brilliant idea. Not only are they expanding and  growing profitability, but they are also making money showing others how to do it…check them out and see what they are offering.

Consider following in their footsteps. If you are succeeding in your industry, and have figured out how to grow and develop in this most difficult time, then share your wealth, help another and earn from your knowledge. The internet is a wonderful and effective way to communicate, market and gain additional business selling what you know, training others and earning.

If you happen to be in the ink refill and re-manufacturing business, definitely call Ink Solutions, and check out their offer to show you the way.

Either copy  what they are doing or utilize their services, either way they are offering us something very valuable… their expertise, experience and willingness to share it. They are also showing us how to maximize our expertise by sharing it with others, a double win.

http://inksolutions.wordpress.com/      Lets talk ink…their blog

Call Karl and talk to him about it.. either do it or copy them, they are leading the way.

 

One small business man gets it and is expandng his business in this down turn.

I met a  small business owner today and asked him how his business was doing, expecting the usual sad story of reduced revenues and choking debt, crushing overhead and a dismal future.

Instead I got the most up beat presentation of delightful and profitable growth and development imaginable. I was awe struck and asked him to what does he attributes his current success in the face of dismal sales  the retail market is experiencing.

His answer was right out of my previous posts in this blog and here it is:

He reported that in view of this deep recession, he believed all of his competitors were ‘hiding, waiting for the recession to end’ therefore he went after a larger share of the market place believing there was a huge opportunity for those who dared.  He acted as if there was no recession at all. In fact he looked at me and said with a winkle in his eye, ‘What recession!’

He said he increased his inventory and selection, added additional hours and staff, and made certain his staff rocked and rolled, with a positive ‘its happening here’ attitude, inviting people to come, have fun and spend…and they are. His positive attitude in a down economy was perceived as a breath of fresh air, and was extremely attractive promoting what everyone wants to do… feel good about spending again. He gave them permission and it worked.

Take a lesson and apply this to your business.

His revenue has grown faster and higher then ever before… He gets it.

 

Why are the Yankee-Red Sox games usually so exciting? What does this mean for your business.

It’s an interesting question that has direct relevance to any  small business owner. The question being, why do professional athletes, play exceptionally well, better then most days, in certain predictable situations and what can we learn from this that will help our business achieve greater success?

Most every game between the Red Sox and the Yankees is exceptional. It is mostly because of the intensity and focus the players  bring to that particular game.

What makes that happen? They are professionals paid incredibly well but they perform to their peak of their ability when they play each other above and beyond normal every day games…..sounds silly. Shouldn’t they play as well as they can every game? Why in this particular match up do both teams reach as high as they can possibly go and usually achieve greatness above and beyond normal expectations.

The answer is a combination of teamwork, leadership, and emotion.

Can it be done every day? Can this lesson be transferred to your business? Absolutely. This is not to say that every day can be a Red Sox- Yankee game for your business but the principles remain the same and the process is very important as the results are stunning.

Leadership. If the managers are leaders, and are involved in training, supporting, and working the men into an effective team with goals and the appropriate tools to perform the job, and if there is an incentive for them to succeed, a combination of personal accomplishment and reward. Increased productivity and greater quality are the results and it is available.

Team. A team that works together and supports one another, as that is a good definition of a good team, will pull together and accomplish far more then the sum of the individuals would produce if acting individually. If you have created a real team you can achieve greater results, as teams do better then individuals working towards the same goals.

Emotion. Caring, self accomplishment, passion, gratification, all are powerful emotions which if in play can propel any individual and team to greater heights all the time. This ingredient has to be developed and is part of a team effort, but it must start with management being good leaders.

Teamwork, leadership, emotion…..if all in place and operating well, it will yield a far superior result.

In short, your employees like the Yankees or Red Sox players are always capable of producing better results if properly motivated, if effectively lead and if part of a real team experience, they can reach higher levels of ‘play’ and do a better job producing better results every day..

Leadership, teamwork, and controlled and directed emotion, a desire to win and a reason to accomplish more. That’s the reason the Yankee-Red Sox games are so great, they both have excellent leadership, are working as a team striving to do better for themselves and each other and are emotionally driven to play as well as they can…it works.

It could be done in your business. Your employees could be playing as if they were in a Yankee-Red Sox game…or as an average day.

It’s your choice as one key ingredient is leadership, and that’s you. Develop the team, cultivate the will to win  and ennjoy greater productivity and better quality.

 

The SBA puts another stake in the heart of the small business world, seller financing is now absolutely necessary if you want to buy or sell a business.

Bad news for sellers and buyers of small businesses. Despite the need for support, the SBA has done it again, making it harder and harder to buy and sell quality small businesses.

Read below, it tells another sad story…the net result is, sellers will have to finance the purchase of their business.  One more barrier to small business development …as if we didn’t have enough problems finding financing support now we have the SBA working against the small business owners. Makes little sense, but it is what it is…seller financing is now the only answer.

Feb. 6, the SBA advised lenders that, in cases of business acquisitions, no more than 50 percent of a 7(a) loan should be used to finance goodwill – the intangible assets of a business that create cash flow. Hard assets, such as real estate or equipment, are not included in goodwill. In no case should goodwill account for more than $250,000 of the loan amount, according to the SBA’s guidance. Lenders and business brokers contend this goodwill limit will make it impossible to use SBA loans for many business acquisitions, particularly those of service businesses or professional practices. As a result, it will be harder to buy or sell a business, said Matt Ottaway, general manager for Sunbelt Business Brokers, which has 200 offices across the U.S. This could lead to a decline in the value “of every small business that’s out there,” he said.

Many successful businesses have few hard assets, said Scott Gabehart, a certified business appraiser in Phoenix, Ariz. “Why do you want to punish companies that are highly profitable?” Gabehart said. “That’s basically what this boils down to.” The SBA has received considerable feedback, both pro and con, on its new goodwill limit and will issue further guidance soon, Zarnikow said. The agency had not previously addressed goodwill in its guidance to SBA lenders and felt it needed to do so in order to encourage prudent lending, he added. It also wants to encourage sellers to finance the purchase of their businesses because that gives them a stake in the new owners’ success.

Another nail in the small business coffin.  Ok, seller financing it is….. thanks for the support SBA!

 

Save your business, save your home, save your life style, yes we can.

It is a changing environment. The economy is melting down,  business revenues are seriously declining, and many businesses are closing their doors at an unprecedented rate. Foreclosures stemming from business owners refinancing their homes to invest in their business are now expanding rapidly. Unemployment is higher then ever, banks will not lend.

The net effect of your business closing is typically the destruction of the financial foundation of many families. The owners of the business and the many workers who depended on the jobs the business provided are the casualties. The negative effects of the economic meltdown is catastrophic.

What to do?

Protect the business. Reduce overhead and market intelligently and keep the economic engine running as it is what supports the business owner and the many families involved.

How to do this?

Kill the debt with our debt workout strategy and free the business owner to run his business successfully.

Visit our small business bail out program, described elsewhere in thus blog,  which preserves the business, the home and strips the debt away. This works. Nothing else will. What options do you have?

Call Norm, 413-584-2581  he will arrange a no obligation tele-conference to discuss your options.

 

It’s not working. The SBA cannot even give money away through the banking system. Seller financing is the answer.

We read about it every day, how difficult it is to borrow money in the current market.

The banks have virtually shut down, especially commercial lending. They may as well hang an out of business sign on their door, but should probably ad the following, we are out of business because we do  not believe in our economy…at all. Why else would they refuse to lend?

A very good business man I know, who has already had a small SBA loan and has paid flawlessly over many years. He has an excellent credit score, in the 700’s, his business is and has been profitable and is growing monthly both gross revenue and profitability, he has adequate collateral and he wants to borrow a significant amount to purchase another profitable business heavy with assets to merge into his own. It is a natural deal, perfect in every way. No real risk..

I sent him back to his bank and suggested he seek another SBA guaranteed loan, and with a 90% guaranty, how could he be refused.

He actually was not refused, his bank simply said we are not doing any lending so thanks but no thanks. He went to anther two banks and heard the same story. Not even interested in an application, unmotivated by a 90% guaranty, high collateral value and the other benefits this borrower brings to the deal.

It amazes me, how could they just go out of the lending business even with 90% guarantee from the SBA?

So this deal will not happen, yet, we continue to search for a bank still in the lending business.

What to do he asked me?  I thought very briefly and gave him the only answer available.

It must be done with seller financing and a rap around note. In other words, the seller must keep his financing in place, my buyer will step into the sellers LLC and pay the note as well as an additional note to the seller for his profit. The seller is unhappy as he wanted a big hit and to be out of the debt obligation, but it is what it is and if this buyer cannot finance then no buyer can. Thus the seller must realize if he wants to sell he must be the bank.

This is the way we must do it in today’s market.

So yes money is not available from the lenders, but it may be available from the seller. Seller financing the only remaining avenue. Explore this approach, educate the seller and close a good deal. It is the only way in today’s shut down credit market.

 

Obama doing too much? A perfect example of how well flat management works.

Many are criticizing Obama for doing too much. Starting to many programs and ‘biting off more then he can chew’.

Not so I say. While I am not endorsing his programs I am very pleased with his       ability to manage a diverse, complicated and numerous list of agenda items and he therefore is a perfect example of  implementing an effective flat management approach and  we see its benefits. he is accomplishing much in a very short time.

He states the goals he wishes to achieve, empowers his cabinet members to do what it takes to reach his objectives and  to also figure out how to get there, what the strategy may be and then to implement effectively.

Of course Obama inspects their process, reviews their findings and affirms their strategies, further checking on achievement.

He further accepts final responsibility and the results be them good or bad and pays respect to the managers whose efforts the program represents, giving credit were credit is due.

The man is an excellent flat manager and is demonstrating how much more can be done if he removes himself from every possible decision and micro managing every effort and trusts his managers to do their job.

That is why he has cabinet level appointees handling major areas of his agenda and authorizes them to create programs that will reach his goals.

That is flat management. Without it he would be able to do far less and would buried by the enormousness of the tasks.

Take a page out of his book, manage flatly, get far more done take responsibility for the failures and applaud the managers giving them credit for the successes they achieved. Inspect, review and project but let your managers carry the heavy weight. Give them discretionary decision making authority to reach your goals and hold them accountable for their achieving the desired end. Inspect them frequently along the way and free them to do what they have to do, encourage them if they have failures and errors and accept the responsibility for defeat while rewarding them for success.

Thats flat management …if Obama can do it, you can too.

Now. 

flat management, its the way to go.

Good job Obama, now hopefully his goals are clearly defined and the right ones, that remains to be seen, but his management style is excellent and will afford him the opportunity to get far more done then a more pyramidal organizational style and format.

 

The banks are doing it again, collection through intimidation, now they are trying to deny you your right to professional representation.

Aha, the credit card industry, leasing companies and some banks have found a new way to abuse borrowers in default. It’s a  very formidable issue as strategies to thwart this abuse are cumbersome and difficult and often prove ineffective..

Here it is.

Knowing that the borrower is easier to intimidate into submission and into making payments they cannot afford, they staunchly refuse to talk to third party representatives saying they will only talk to the borrower.

This is patently absurd. Every borrower is entitled to representation, this is a basic inalienable right. Every borrower is entitled to appoint anyone with a power of attorney with the authority to deal with the bank. Denying  the borrowers right to a duly appointed representative is a breach of their rights and a flagrant abuse of their own fiduciary responsibility to the borrower. It is done only to remove professional representation from the borrower which the bank believes will then result in a better collection process for he bank or credit card company.

That is ridiculous.

You are absolutely entitled to professional representation and any effort to remove this option is done for the sole purpose of intimidation and removing your best opportunity for a responsible result. The bank or credit card company strategy being to block professional representation and unfairly take advantage of you.

I have retained counsel to produce a legal memorandum on the subject which we will use to remove this barrier from us when it pops up. It is a small minority of offenders but I see it growing as it works for them, so they think.

The next problem is the huge bureaucracy of the companies we deal with. Frequently they are so large it is extremely difficult to reach the appropriate decision maker and since this is ‘policy’ created at high levels, no one is authorized to make changes… another silly excuse for bad behavior. They have them all.

I recommend to my clients that when the bank calls them after you have given power of attorney to a representative they simply state they are being represented and please talk to our representative. This will eventually work, although it is still cumbersome as the chain of command is very long and stubborn, they frankly do not care if you end in default and then go to the workout department . They are there to intimidate you into doing what you cannot  and should not do.

The Workout Dept. tends to be closer to the law firms as it is aprt of their strategy also, to use the legal war club to collect,  so this strategy will work out sooner then later with them as they will seek legal opinion and they tend to capitulate and consent to represntation.

It is indeed unfortunate that the creditors feel that it remains in their best interest to rely on intimidation tactics rather then quality representation for a productive conclusion. They still do not get it, that this type of predator action is contrary to everyone’s best interest and may have short term positive results for their collections but long term negative results for all concerned as all that will happen is an ill conceived momentary spike in collections and a faster burn out with a poorerlong term  resolution. It will simply force people to bankruptcy as opposed to workout as their only alternative which is far more expensive and will yield far less then a legitimate workout.

When will they understand that cooperation with their clients will only result in better conclusions. If we all work together imeasurable ammounts of success will be achieved…for all involved.  When will they probably figure this out… probably never.

 

Take the judgement, whats the difference

I am frequently challenged by the problem of my clients being sued by the bank or a vendor, and their desire to enter an answer and challenge the motion for judgment. They somehow feel if they do  not answer they are reducing their position and harming themselves.

They desperately want to defend themselves and avoid the judgment. They are concerned by tits effect on their credit and somehow they believe that this will cause them harm in some way.

First, lets get down to the basics. Chances are very good that you borrowed the money, spent it and now cannot pay it back  as agreed. Probably the bank did nothing wrong. Chances are there is no offense nor a legal defense. So any answer would be either made up, irrelevant or frivolous and will be dismissed with a directed verdict for the plaintiff bank and all that would have happened would be additional expense and a waste of time with no practical advantage occurring.

So why do it?

In fact I frequently offer the bank an agreed judgment, explaining we are willing to cooperate fully, wanting to reduce unnecessary expenses and waste and would prefer to be working on the workout as opposed to a frivolous defense that postpone the inevitable and wastes money.

It is not a cop out but is a distinct strategy. The bank will get the judgement anyway, so what could possibly be the net gain of answering and defending.

Your lawyer may answer and counterclaim, I would cooperate and head towards workout, where cooperation on both sides pays off.

If you really want to file an answer and have your lawyer do it, that will also have the effect of shutting of any direct communication with the bank as they will then insist on lawyer to lawyer discussion as a suit has been filed and answered, That destroys any meaningful workout discussion between the primary parties, you and the bank. Definitely a bad idea. It also costs money and again with what possible gain in mind?

If you answer it yourself then you are really wasting your time and going to annoy the bank even further as it is a colossal waste of time money and effort.

Acknowledge you failed to pay, which is true, acknowledge you do not have the resources to comply with your note and get to the workout where the issue can best be resolved for both sides. Forget trying to dabble in the legal process. You have no case, more then likely…so why pretend and waste time and money. It defeats the real goal, a valuable workout.

It is not irresponsible, it is a productive strategy.

 

What motivates your banker ? Embarrassment and fear of losing his job!!!!!

An interesting and important question, what motivates your banker?

I would think a combination of risk assessment,  profit projections and loss mitigation.  Sounds right…and when dealing with a workout, while losses are to be avoided as best as possible, it is certainly an expected   part of the program.

It is my belief that a good banker should be unemotional and focused on maximizing profit and minimizing loss, without ego.

Ok so I was wrong, but really this wrong???

Here is how one recent conversation went with  senior bank officer in the workout department…with a low bid of less then $150,000 for the assets of a business that had borrowed $1.7 million. The buyer had the assets appraised and that was the basis for the offer, appraised value.

The banker was aghast at the offer  and laughingly said he would not accept this offer under any circumstances. In fact ‘he would be embarrassed to submit it’, and that ‘it may cost him his job if he did.’

I queried, why he could possibly feel this way and act in such a manor as the assets were appraised by a legitimate appraiser who worked in liquidations, the business was loosing money and thus only worth the value of its assets, which was being offered. I further reminded him that the inventory had a three day life span so it is worthless in foreclosure, that the business operated out of a lease and thus was not valuable collateral and that necessary licenses required to operate the business would extinguish upon sale or transfer and new ones were not available until 2010, which would have he effect of reducing the revenue by 50% thus making the transfer all but impossible to anyone but the proposed buyer who was  an officer of the current corporation and could manage a license continuation thus making his purchase the only one possible.

But the asset manager declared his position as unmovable, he would not submit the offer to the SBA nor take it seriously under any circumstance, despite our appraisal and the license issue.

I was shocked. I challenged him on the general accounting principle that a business that loses money is only  worth the value of its assets, and thus the offer while much lower then the loan  was a viable offer that needed to be submitted and considered.

He refuses and continues to market the business through brokers and networking. He said he would take another month to see what he could find.

I reminded him of his fiduciary obligation to the borrower, and that his refusal to consider or submit this purchase offer because he was ‘afraid he would lose his SBA guaranty’ was a breach of his fiduciary responsibility when in fact the offer was at appraised value, nothing any of us could control.

The man was motivated by his embarrassment by the low offer in the face of such a large loan and fear of losing his job because he submitted such a low offer. He would rather take nothing then our low offer from a bonafide bidder.

What a predicament. How unprofessional, yet a real barrier to my clients position.

What to do now? I have a few ideas, I will let you know how it works out and what happens. What is imporant is t recognize that it is important to consider what in fact is motivating your bank officer in a workout, once determined it may be easier to deal with his issues.

 

Welcome to the future. How social networking works for small business.

This whole social networking thing is certainly a new concept. Especially for us ‘older’ gens who have not grown up with facebook, youtube and IM, and thus are not in tune with what’s happening. As I have said in the past, keep asking your teenage kids what going on and maybe they can explain it to you…blogs, youtube video, facebook, myspace, and now twitter…it gives me a headache, but millions and millions of participants are involved in doing it daily so we had best pay attention. Something is happening.

The big question I have is how does this help business? I have learned quite clearly how blogs work, I am writing a post for my blog at this moment and every day hundreds and sometimes thousands of visitors read my posts. It’s the free dissemination of valuable information and appreciated by many who read it. I know as they tell me this in their comments. What does it do for me?

Sometimes it creates business opportunities, most times it is simply the gratification of my offering help to someone who will benefit from it without my expectation of any return…how does that help my business? I believe it helps me because I become a resource and part of an allusive community with members all over the country and  world,  people return and learn form my posts and eventually because I become part of a unique community, they create a relationship with me and when needed  may become clients. Allusive, yes. Different, also yes. Does it work? Yes.

I speak with a half a dozen people per day who I invite to consult with me on my blog posts about their business debt issues with no obligation. Most I give advice to, some retain my services. The ones I give advice to are the more interesting as that is the true meaning and value of social networking for my business application. Sharing valuable information, solving problems and doing it without expectation of a return. That some hire my services is a welcome and obvious benefit that works for me and my clients, but the true value is in the dissemination of valuable information and my involvement in solving their business problems without expectation of a return that creates a social network that will support my business mission.

I enjoy it thoroughly, and benefit from it significantly. Yes it is tough to figure out but go with it, it works, it will become clearer as you develop your own community and give.

Verizon has discovered the same worthwhile results in a different application with a real social network twist.

They are experimenting with the 1% of their users who are experts in the setting up of networks, HD tv’s, and all the other applications they offer which have typically been handled through India customer service support and which are  now being experimented with by being handled by volunteers, on line experts who want to hep others needing technical assistance.

In short, people want to help one another,  they crave community, it may be hard to believe in this day of greed, but it remains true. People want to help one another and be involved in others lives. People who are very good at something, say hooking up in house tele-communication systems, very confusing to most and mastered by a few, are willing to spend their time assisting others in overcoming their technical barriers. They are very good at it, care and will take the time to help others in need of this technical support. Verizon reports that some  volunteer’experts’ are putting in upwards of 20 hours per week doing an incredible job helping customers hook their electronics up.

Thus instead of talking to India, which everyone hates to do,  and getting a low level of technical support, non-caring support. Now people can talk to volunteers who are on line for the purpose of helping others overcome their issues. It is working great, it costs Verizon nothing as these experts are doing it because they care and want to, not for a pay check, and the results are stunning. The 1% are willing to help the 99% because they get the point of social networking and are willing to participate because they care and enjoy the rush of helping others in need. Free without expectation of a return.

A business discovery that is very new, very different and very hard to insert into the normal business equation…people helping people in a business environment because they care, and because they enjoy being part of the social network that’s developing…that’s new. That’s radical.

I would say try it, but that’s also a huge leap of faith. Perhaps you can try a blog first, maybe facebook second then advance to a video on youtube and then maybe even twitter. By then you will be a regular participant in Web2  the new world of social networking…welcome to the future it has arrived. Now figure it out. Your kids understand it…it’s your turn.

 

How to implement successful action plans…

It is one of the the biggest  management challenge we all face…implementing change.  Creating action, with specific goals and objectives.

Typically delivered through an action plan. The following way management can evaluate and produce an action plan that will work with long term results, was taken from Attitudinal Dynamics of Driving book and course, designed to assist people in changing their bad driving habits. It makes sense so here it is.

SAMRIC: an action plan should be defined and developed as follows…and if done it will work.

The plan should be:

Simple….clear, understandable

Attainable…within ones ability to do it successfully,  realistic

Measurable…has a defined measurable goal

Repeatable…can be done again and again

Immediate…starts immediately, now, not next week

Controlled by you…something the individual can do on their own

It still requires personal responsibility, initiative and commitment, but these concepts help us design and implement plans that work.

Try it, anything that helps  us do better is valuable.

Of course what is nt stated in this plan is the basic requirement for effective leadership and management. The only effective plan is driven by quality leadership and management which will determine the ultimate success of any action plan. However these are the basic requirements that must be implanted in any action plan if there is a chance of it being successful, then the manager must track, monitor and control the process supporting their employees with training and whatever other support required to assure success.

In the end it’s a team effort but any plan requires these elements. Good luck.

 

Design an effective training program and most of your employee issues are over!

I learned along time ago that training is one very important key to success.

Here is the basic concept: Train your employees, representantives, anyone associated with your business to do their job the way you want it done…and chances are dramatically improved that you will get what you want…success!

When my son was 7 years old and wanted to play baseball, like any dad I took him outside and began throwing easy slow underhand pitches to him encouraging him to hit the ball. Then I would toss the ball to him and further encouraged him to catch it and throw it back. We all have experienced this in one way or another. It is typically stressful, unsatisfying as there s far more failure then success, but it is a right of passage so we do it , endure it, and somehow over time the kids figure it out and get better.

However in my instance, it became very clear very quickly that my son was not born with the innate ability to hit, catch or throw.

Then the light went on as I realized I had two choices,:

1. Let him learn by trial and error over time confronting more failure then success until he put it together.

2. Teach him, demonstrate, then train him to do it correctly, effectively, and consistently the right way. More fun, more success quicker, better skills.

I did this, breaking down the components, demonstrating he correct technique and helping him learn by reviewing and practicing with him  and correcting him when he did it incorrectly until he got it right and only then could he practice how to do it and ge  better, the right way.

My son and daughter became excellent hitters, fielders and throwers.

From that moment on, I realized that everything had to be trained, nothing was natural, and learning how ‘to do it’  was a process that could be delivered effectively.

I have never forgotten that lesson, thus when I recently decided to expand my business with  regional representation, and personal service, I of course designed a training program to make certain my reps could deliver the program as I deemed it necessary, transferring my experience, skill and expertise to them in a way that they could absorb it and become experts quickly and effectively.

So I designed a training program that included the delivery of much content and necessary information. Then I put them on the telephone to make the pitch to interested callers, all the while listening and then critiquing after the call, as they got better and better. Then I flew in a prospective client and they observed my  pitch and saw me close the deal. More calls, more review of the content, more live pitches….until over three intensive days of training they became competent in ‘the way’ and I was confident they could deliver the program effectively, confidently and successfully.

How else? The alternative and most common practise would be  to throw them into the deep water and let them swim or sink.

How silly, the swim or sink program will be filled with failure as they search for the best way, re-inventing what I know works and discovering what I know does not work through trial and error, reinventing the wheel again. Yet this is the most common approach, learn by doing on your own.

My reps learned by being trained and then became immediately successful.

That is what training is all about, take the time, demonstrate, critique, practice, practice and practice,  learn and then do it correctly sooner with far more success for every one, the company the rep and the client.

Hallelujah, there is a way and it works!!!!

If only you would do it…train, train, train. The path to successful growth and development. It can be done…but you have to follow the plan and train.

 

Throwing good money after bad…

I have heard this saying many times over the years and while I understand it, I experienced such a clear example of the principal today that it deserves everyone paying attention to the concept, especially in todays meltdown economy.

I had a potential client discuss his real estate holdings which are massively underwater, with mortgages worth twice what the property is worth. Worse yet the property is yielding revenues inadequate to even support half the mortgage debt service let alone other normal overhead items. The owner is paying the overhead, insurance and mortgage note debt service mostly out of pocket without expectation of a return on his investment.

He should either engage in a very short sale and walk away or at the very least stop payment on the mortgages and engage in a workout with the bank as perhaps a viable resolution can be engineered.

His position was he cannot stop paying the mortgage as he has over a million of his own cash in it and he does not want to lose it. He does not understand he is throwing good money after bad…

What he fails to accept is that  he already has lost it. He continues to lose more every day as he pays mortgage notes that represent far more then the value of the real estate and far more then it throws of,  thus he is in essence throwing good money after bad.

The bad money is already spent, nothing he can do about it. The good money is not yet spent and thus a decision can be made whether or or not he should spend it. Its good because it remains in his control, awaiting the rightt decison a decision that will return a profit.

There comes a point in any investment when this decision must be made. When the arithmetic no longer makes sense, when the values are not there, when the property is so upside down or so unable to return a profit to the investor, we would then throwing  good money after bad has already been spent and lost.

At some time it is appropriate to take the loss and walk away, spending the good money on good investments that can provide a return and not protecting bad money already spent that has no possibility of returning anything at all.

Its is called taking the emotion out of the investment formula. Not crying over spilt milk and investing in properties that return a profit as opposed to protecting investments already made that are losers.

Good money after bad…not a good idea. Stop doing this today.

 

Understand what a UCC does and means.

In a word, a UCC is like a mortgage on real estate. Consider it a ‘mortgage’ on other types of assets, actually everything else other then real estate.

It is filed publicly for all to check on and discover. It is the way the banks protect their collateral. By the fact that the UCC (uniform commercial code act, section 9) is filed in local registries and on line, thus making it easily discovered by anyone interested, it puts the world on notice that the collateral that supports a loan must be paid off before title can be passed to the buyer. This protects the lender.

The issue is, I am discovering borrowers who ignore the UCC, and sell the assets to unsuspecting and perhaps inadequately represented buyers who failed to discover or even look for the existence or absence of a UCC on the collateral.

When done, when an asset with a UCC filing on it, is sold ignoring the UCC, the buyer will not have a defensible title. The bank whose collateral has been inappropriately sold and its  UCC filing ignored, can reclaim their assets and leave the buyer high and dry.

If impossible to be reclaimed, or if the value has been reduced, the bank has every right to pursue the original borrowers and put them into default.

When this happens, it is a mess. Everyone sues everyone and everyone is liable for all the losses they incur and those of the bank. 

It is impossible to escape the wrath of the bank on this issue unless the banks note is paid off in full…which is highly unlikely. The bill of sales is worthless as clear title cannot be transferred with a UCC on file.

Yet I see more of this then one would believe.

A better result would be to take the offer to the bank and possibly negotiate a split of the sales revenue in exchange for a release of the assets to the buyer. This works. In a more typical situation the bank will demand all the payment and apply it to the loan reducing the obligation.

May not be helpful to the borrower/seller but it is the way it works. The bank has priority on the collateral if and when liquidated.

Be aware when you sell assets that may be encumbered by a UCC. Also be aware that typical security agreements which include a UCC also includes after acquired assets, thus it typically covers everything the business has and acquires.

One important issue to understand, if the business is acting in the normal course of business doing what it does on a daily basis, there is no violation of the UCC when assets are sold and permission is unnecessary for the sale of inventory. If capital assets are sold that are not part of the daily normal act of  doing business then the bank must be included in the transaction and permission must be received and a release of the UCC must be acquired.

If the business is in liquidation, everything it has including accounts receivable, inventory, and assets of any nature are the collateral of the bank and revenues received from liquidation are property of the banks. When in liquidation, it is for the benefit of the bank.

I see too many mistakes made regarding this issue and  it is very damaging to the relationship with the bank and the potential for a good workout. Be careful. Be smart. Do business correctly, it is the only way.

 

The fox, your banker, is in the hen house… again and you opened the gate and invited him.

I can’t believe it, or actually I can believe it, as it happens every day, despite my many warnings, even a few of my own clients are occasionally guilty of abandoning the plan and becoming a disciple of the bank.

Here is what I see, and while I have warned you all before, until this self destructive practice stops  I must continue to warn you as ignoring this can be fatal to your business workout.

1. The bank workout department is a liquidation department. Its goals are to extract as much capital  as they can, until they have sucked the lifeblood out and then they foreclose and mop up the mess, liquidating  whatever remains, leaving you the borrower ‘on the street’ without anything left.

That’s their thank you for being a good customer and working with their workout department…the liquidators.

2. Along the way they may extract more cash then you can afford,  killing any chance of a turnaround, obtain additional collateral, and additional guaranties, all in the name of the workout aka the liquidation process.

3. You hear them say they believe you are worth saving and they want to do business with you, that you are their kind of business man, and if we all work together we will get out of this mess…together!

AND YOU BELIEVE THEM?

Yes you do, because for the most part we are all wanting to cooperate, you all feel very responsible for the mess you are in and you all want to honor your word and pay back the loan even if the circumstances have changed dramatically and you  cannot afford it, do not have the resources to accomplish the workout and are throwing yourselves on the banks sword so they can extract more cash.  You  believe you have embarked on the honorable and correct path, despite the self destruction.

Are you nuts?

It’s a war. The banks against the borrowers and their job is to intimidate you into cooperating with their liquidation plan.

Your job is to run as fast as you can from therm, in the other direction and batten down the hatches as you fight for a workout that works for you, not just the bank.

The only answer is debt reduction, not modification which is another word for financial  death.

You may modify it any way you want,  but in  the end it is the debt that will kill you, not the reduction of revenues, but the debt that will eat you and your organization.

Will the bank give you more working capital? No.

Will the bank reduce your principle? No.

They will reduce interest and defer payments till later, oh boy, keeping you barely alive while they collect more from you now.

What a deal.

Until we become emotionally self sufficient, and therefore capable and prepared to thwart the banks insistence that ‘we work it out with their workout department’, until we understand that this is the fox inviting himself into your hen house  to eat your chickens, until you understand this and gain the strength to stand on your own feet, look the banker in the eyes and tell him thank you but unless you are willing to work towards solving the problem then no thank you start the foreclosure process now.   Then  call me for help.

413-584-2581. Norm will arrange a no obligation tele-conference for us to discuss your options.

 

The most valuable reward possible for an employee, and its not cash!

We probably  all know this already. However it is so valuable , so effective, and so easy to deliver that it needs to be repeated as few follow this strategy and those that do may not be doing it very well. There are a few basic requirements that apply, which we can all learn and implement…today.

The basic strategy is called positive reinforcement. Telling your employee that he or she  did a good job when they performed some admirable task, above and beyond the call of duty. You determine the benchmark that results in recognition and positive support. Then deliver the thank you.

Here are the rules for making this work.

Do not simply say ‘good job last week Joe’…, that does NOT work…

2 errors.

1. Not specific enough, you must say, ‘Good job Joe in finishing that report on time’… that works.

Rewards for accomplishment must include exactly what they did that you are rewarding them for.

The reward is the recognition of their superior work effort.

2. It must be contemporaneous with the work effort, not days or weeks later, but the moment you are aware of the success the reward needs to be delivered…as close to the accomplishment as possible.

The reward is about recognition. Certainly the bosses recognition with a ‘verbal notice is good. Better is a written note  from the boss. Best is public recognition b y the boss but communicated to the larger community, be it the work force or perhaps even the local community if the job warrants such a response. It depends upon what was done.

Local press releases may be a huge reward, internal but wide spread rewards are terrific as it elevates status within the business environment and supports others to try and achieve such acclaim.

Parking privileges, extra days off, notices in thee company newsletter, awards, plaques, dinners, thank you notes, all work but the three rules are as follows:

1. Recite the specific job done which warranted note worthy thanks and recognition with the thank you.

2. Do it as close to the action as possible.

3. Broadcast the  thank you notice over  as broad an audience as is reasonably possible, elevating status accordingly.

Interestingly, others in the work force will want similar status and the individual receiving such accolades will want to experience it  again and will be more likely to repeat his excellent  work habits. A win for everyone.

Just a reminder, do it, and do it right. the dividends are huge.

 

Workout Help is on the way… Our small business bailout program now has direct representation in Florida and New England, other areas soon.

The demand is significant. Small business owners all over the country are looking for answers, strategies, bailout plans, anything to help them survive this huge economic and business transition you are all experiencing thus our services are in demand all over he USA.

So we are expanding to meet the need. We of course will continue our current national practice we save more clients every day, yet now we are going to be able to provide our unique strategies with direct personal involvement in your local market areas.

We have recently expanded into Florida, the second most severely effected state in the country, California being first. I have included Aly Mawji, an experienced mortgage broker and financial adviser, having trained and developed his skills in the New York metropolitan market,  focusing on difficult financing situations throughout his career.

My second expansion is in my own home market area, New England. Sean Rosser, from Warwick Rhode Island, will be heading up this division. Sean is a very experienced business man, having enjoyed the benefits of a Harvard MBA as well as years as an investment banker. Sean is also a small business developer and has the hands on experience to know what happens when revenues decline and the market disappears and debt becomes the bone crushing noose around small business enterprise.

Both men will be developing satellite offices designed to deliver our services in a more personal localized approach.

In anticipation of their successful support of more localized business relationships, we are staffing up in the home office so we may effectively support our process.

We will continue to expand into other areas as the right people come forward and identifies themselves.

I am a huge believer of building business around talented people.

As Jack Welch taught us, being perhaps the most successful CEO in modern history, (General Electric), he built his empire around successful talented executives who were fearless, smart and committed.

I will follow his lead. These men are fearless, talented and committed, and they stepped forward seeing the success we deliver and wanting to be part of our program. Actually both have been clients. Both have experienced the incredible power and success of our program. Both get it, experienced it first hand, and want to provide it for others in similar situations. Others will identify themselves and come forward. They too will have opportunities to join our team as we expand.

We cannot rely on the government to provide answers for small business owners, it is not going to happen.

We must rely on our own resources. and we are a primary source for support in assisting small business owners navigate this enormous catastrophe, the implosion of the economy

I will be providing contact information soon as we install the support mechanisms appropriate to reach the market.

There will be seminars, web site information, and personal availability…soon.

Help is on the way, now with personal presence…in Florida and New England.

There will be more small business owners saved. Call if you need direction, help or want to get involved. 413-584-2581, ask for Norm he will arrange a tele-conference for us to talk.

We are setting up our Florida and New England offices now, call for contact information for the partners handling each market, Sean or Aly, …They are ready willing and able to protect your assets and strip off the debt…Call now.

 

Follow up failure, a curable disease. Increase sales revenue dramaticaly, with little or no additional cost.

Most small business owners  are missing a golden opportunity to increase revenue dramatically, sales they have already paid for…yet have failed to close.

The simple reason is they are forgetting to follow up.

The second most important list you have, are leads of people who have already responded to your marketing programs, who have already shown up, but have simply not bought…. yet.

The point being that they demonstrated their interest but for some reason were not ready to purchase. The key point being that they showed up. They identified themselves as interested, they qualified themselves, they want your product or service, they simply were not ready to close on that day.

Failure to follow up results in no sale  and worse yet  they may end up elsewhere and purchasing when they are ready but not with you.

That is the issue, people buy when they are ready. Shopping includes checking you and your product or service out, but not necessarily purchasing on the first visit.

In fact research indicates that it takes on the average 9 visits  before a purchase decision is made. Visits can be in person, it could be reviewing an ad or a flyer or any marketing piece. Thus if a potential customer comes to visit you on the first or second or eighth inquiry or visit, you may not get the sale despite your preparing him for the close and the sale may go to the next person pitching him the ninth time. There goes a sale you paid for, and failed to follow up on…at least nine times.

The issue is then do you have a system for following up…at least nine times? Probably not, few do. Please understand that averages and statistics are just that, so some may buy on the first or second pass through or on the third or fourth, some on the tenth , eleventh, or twelfth, with the average being 9 times.

Many, far too many small business owners leave the follow up to their potential customer to manage and accomplish, waiting for the customer to buy to call or come or somehow identify themselves, again.

Lets change his concept and view the 90% of the people who come to you and do not buy as the most important source of business available, and lets create a follow up program  that works and converts visits to a purchase event.

You need a systematic follow up program, be it a newsletter, a call back plan, a mailing plan, e-mail, a visit, whatever you determine will work best. The point being you need constant follow up and contact over and over with those who have identified themselves as potential customers just not ready.

Do this or you may be your competitors best marketing program as the customer will buy from someone, and if not you then who? Your competitor.

Thus figure out how to identify, track and communicate with everyone who has shown up but not purchased, they are your best source of new customers. Pay attention to them, they have much to offer and you have already paid for the lead.

One word of caution, do not overdo it, follow up with respect and decorum, not with high pressure sales techniques. You can create animosity instead of a good relationship.

Follow up failure is the problem, identify it and cure it and reap the benefits…

 

The real effects of the economic meltdown, the decline in value of residential homes in twenty cities, and the real unemployment figures.

We all know that  real estate market is soft…experiencing  unprecedented reductions in value, but how soft? How deep is the decline in value in real dollars and percentage. Here is a chart that is statistically as accurate as it gets, pulled from my favorite blog:
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Check it out, its through January and therefor it is therefore worse now in  April and will continue to decline further as the year progresses. It is clear that the Northeast and other specific cities  seems to be doing better then other area of the country but I suspect the recession will catch up and further softening and deeper declines will occur in these regions and cities as well. No city is going to avoid this decline. We see it as deep as 45% in Nevada and as little as 11% in Charlotte. I will deepen everywhere.

This is reality, along with another sobering bit of information, that if calculated including those who have left the job searching market all together, our real unemployment rate is 15% and climbing. It will reach a 20% rate.

This is the bad news.

The good news, if you follow the program outlined in our small business bail out plan,  see various posts in this blog, you will survive and flourish despite the burn down of our economy.

Despite he continued negative effects of the economic meltdown, small business owners need not be a casualty if they follow an effective pro-active plan.

20 city composites peaked in a June-July 2006 time frame.

Case-Shiller Declines Since Peak Current Data

 

A small business bail out plan….that works. Based on debt forgiveness, it’s as good as cash.

Yes, there is a small business bail out plan.  We have implemented this plan repeatedly very successfully.

There is only one requirement:  After the debt, the SBA loan,  has been stripped off the business, will the business then be able to operate successfully?  If so, the strategy may be right for you.

While my strategy was designed specifically to support a workout with the SBA and the IRS -it applies just as successfully with  other secured lenders. It has also proven just as potent in stripping unsecured vendor debt.  The strategy also provides an excellent position to renegotiate any leases that may be higher then desired.

SBA guaranteed loans, additional secured lines of credit, vendor debt, landlord debt , credit cards, all your debt can be effectively and dramatically reduced or eliminated leaving the business to run unobstructed, free of these overhead burdens that are choking the life out of your business; a business which is already suffering from reduced revenues.

Once the business is secure, resting safely in a safe harbor, a new organization unencumbered with debt or payables, we then focus our attention on reducing the payback on your personal guaranty to affordable levels, payable over a few years.

This transition also gives the borrower an opportunity to re-invent their business, adjusting to the new economy and business environment.  It provides a opportune  time to reduce payroll, remove unproductive employees, change procedures, re-price goods or services, whatever it takes to make the business profitable.

It’s not cash, but it may as well be, as removal of debt allows you the opportunity to turn a profit and to have available cash flow to safely operate. That’s a bail out if I ever heard of one…and there are no alternatives.

This is the best possible solution available.  Call for further discussion, Norm will arrange a no-obligation tele-conference, 413-586-2581.

 

In case you missed the memo, if in default, change banks and accounts…today.

We all know small business owners are under enormous cash flow pressure.  Rapidly declining revenues are causing normally solid businesses to experience cash management issues they may be unprepared to effectively navigate.  Take heed, the following advice may be important to your survival.

Two points.  You MUST take control of your cash flow.  This requires you to be able to determine who you will pay -and when you will pay them.

This further means you may be required to NOT pay debt service when due -or even at all.  Should you be forced into this situation it requires some additional adjustments to regain control of your cash flow and support your decisions as to whom and when you pay.

First: Clean out your bank accounts and create new accounts in a different bank!  Your current bank -to whom you also probably owe money for previous loans, and if you are confronting payment default, may decide to sweep your accounts and remove what cash is there.  This will also cause whatever checks are floating to bounce, putting more pressure on your cash flow.

They have the right and power to do this.  Merely changing accounts yet remaining in the same bank is not adequate.

Change banks and accounts.

Many small business owners have subscribed to automatic withdrawals from their accounts, and this too is very difficult to shut off and takes time.  The answer may be to simply remove cash from the account so there is  nothing to transfer and then re-open new accounts elsewhere.

While payroll accounts should be immune from such sweeping, frequently payroll accounts are not clearly identified and thus are subject to sweeping also.  This may be undone but it takes time and effort, better to avoid the issue.

Other issues:  joint accounts for your children, unprotected if your name is on the account.  If you have such trust accounts or joint accounts, either remove them to other banks or remove your name as joint trustee or joint owner in any way.  If not it is deemed your money and thus liable for your debts and the potential sweeping by the banks.

You musty protect your resources and that means your cash.  You must be able to determine who you pay and when.  Thus remove your cash from harms way, it is crucial to your survival.

 

A major shift in the market, quality and a good deal is in, frugality is chic. Market accordingly.

As the recession locks its bear trap like teeth around everyone’s wallet,  excess spending has all but come to a cold stop.

Small business owners have been forced to deal with the economic downturn -as addressed and directed in my blog- handling reduced revenues by reducing overhead, working our your debt and re-inventing yourself to maximize your opportunity despite reduced demand and revenue. 

Presumably most of you have succeeded in making these necessary emergency moves to prevent failure.

Now it is time to recognize the next step in your new path to success.  The marketplace has changed and we must once again absorb the new direction it is taking.

We are no longer seeing consumer demand and spending contract out of fear, although plenty of this remains and will continue for a while longer.  What we are seeing is real systemic change in the market attitude and this is an extremely important factor to be recognized and reflected in your business equation.

People are no longer shopping just to shop.  People are adopting a new manta, less is better.  Frugality is in. Minimalism is the trend and it is here to stay for a long while.

Even those who remain well off, jobs intact, and future bright (there are some that fill this category) are not spending as they did before.  People are becoming frugal and its hip.  It’s an attitude change and you must recognize it and utilize it to your own advantage.

The new trend is to buy less but to buy quality and good deals.  It is no longer fear driven but now it is value driven, a judgement. 

This needs to be absorbed into your sales and marketing strategies, your manufacturing strategies, your advertising messages, your sales approach, your product and service selections, and on it goes. 

Perceived value is the watchword, quality and value.  It may be a high ticket item as long as the marketing message and the perceived value, is quality and a good deal. 

This is an important distinction and if understood it will be a very valuable tool to begin returning your business to profitability.

Think about it and then implement the changes required to reflect this new attitude

 

You should have already made the necessary downsize adjustments, now what?

Yes, we are involved in a very deep recession, some call it a depression, many view this as a business and economic disaster…and for many it is just that. Irrespective of what we call it, its a time of change and therefor an opportunity to gain ground.

Any surviving small business owner is daily, no make that hourly fretting over what to do to reverse this calamity. How to navigate the reduced revenues which then lead to problem solving discussions.

While this is the first priority of survival,  I am hopeful that you have already downsized, reduced overhead, worked out your debt and performed the many tasks required to respond effectively and appropriately to these issues. Good, now lets move on.

Its time to change our mind set to success analysis. You need a new context. It is time to get profitable…again

What are the reasons for the success of your businesses, your services provided and your products you are marketing?

Not the obvious reasons but the deep seated intrinsic reasons people buy  what you offer.

The good side of our business, the successful side, the reason you are in business and have customers, the reason for repeat business. This analysis will lead us to what we should be doing more of as opposed to what we should be doing less of.

Is it style, quality, selection, service, what are the benefits people are identifying when doing business with you.

This is what we should now be thinking about, as within this catastrophic economic meltdown, there remains opportunity, if only we would look for it, discover it and implement strategies to develop this further.

Its time to accept the reality that we are in a long term economic funk, and now do something positive about it.

Some say re-invent yourself, in fact I say this, but now perhaps the mantra should be, deploy your best hand and do it the best you can.

Amplify the reasons you are successful and deliver more of this…

Define the issue not as  a problem to be solved but as success nurturing….then amplify the success equation…

If we are locked into problem solving you are reacting to a set of external variables, if you look within and rediscover what makes you successful, valuable, desired you can lead the way to greater success. Get in front of the train, and avoid getting run over by it.

It is a mind set, it’s an attitude, it is your context, it’s a plan of action that will bring growth as opposed to solving the problem by just reducing your overhead.

Simple fact, while reduction of overhead is a good thing and must be done, the game will be won on the playing field competing for consumer dollars. Is time to put your best team on the field and win the game despite the awful conditions you are playing in. Remember everyone has the same circumstances, thus we are all dealing with the same issues, but someone has to win and someone has to lose.

Be the winner, start having meetings dedicated to what good you are doing and then do more of it.

Enough of the disaster planning, is time to plan for success.

 

What is the collateral for your loans really worth?

This is an important issue as I constantly see  valuation numbers that are unrealistic regarding  various common forms of collateral.

First and foremost are your homes, vacation homes, investment properties included. There is no equity in most  homes in  America. Appraisals done a few years ago are meaningless today. I find that previously appraised homes are typically worth 30-50% less then the last fair market valuation appraisal done a few years ago and most are therefor under water, worth less then the mortgage it is carrying.

Consider also the fact that if in default and the bank is threatening foreclosure then the appraisal you may want is a thirty day quick sale appraisal and that most assuredly will yield a valuation which is about 40-50% below current fair market value.How low can it go?   Very low indeed.

Then why list it on your balance sheet for a fictitious valuation which is grossly inaccurate? What good will this do you or the bank? This will not improve your workout situation and will in fact cause significant issues to evolve, as your personal guaranty is based upon your net liquidated worth and if your real estate is all upside down your liquidated net worth is also, in most instances. This will result in a demand for more  in your offer in compromise.

The borrowers personal business assets, equipment, vehicles, even accounts receivable are all generally puffed up way to high. Remember it must be liquidated to produce capital, what is the liquidated value is the operative question. In today’s market with a quick sale most assets are worth far less then what is being carried on balance sheets and financial statements.

A receivable over 90 days is to be written off in considering collection value when provided in your business financial statement. Over 6o’s should be cut in half as half will reach 90 unpaid.

Minority interests in closely held businesses or real estate are other arrears for reconsideration. Your minority interest cannot be marketed, who would buy such a position? You have no power to force liquidation, you cannot demand  dividend distributions, it is for all practical purposes worthless, yet I see such entry’s with huge valuations.

Inventories  are grossly over valued, all the time. What is it worth if you had to liquidate it in thirty days is the benchmark.

The list goes on, I recently reviewed a financial statement that was provided for a loan made a few years back and on it  was included some antique vehicles valued by the owner for many hundreds of thousands of dollars, unrealistically. Now it’s value is extremely low,  as it is near impossible to liquidate the assets in thirty days unless the price is reduced enormously. forcing an inquiry as to whether or not this entry was originally fraudulent, it did not help  now to have such an issue to deal with.

Autos in general are typically over valued even though we can get a blue book value on line in an instant. Computers, office equipment, files, desks, for all practical purposes are worthless if required to be resold in thirty days…yet I see them listed for many thousands of dollars.

It just ain’t so.

The point is we must be realistic in your valuations and the objective in a workout scenario is not to puff your valuation high but to realistically declare them as currently valued for a thirty day quick sale, and these numbers are brutally low.

When you went into the bank for a loan you wanted everything to be as high as reasonably possible…ok. However when you return to the bank for a workout, you want everything to be based on a quick sale and thus much much less then previously valued. Circumstances change.

Be realistic, understand the current economy and value appropriately. Get help if you need.

 

Getting paid to manage your own workout!!

Entrepreneurs are predictable. They respond in the same way in similar situations.

For example, when cash is tight an entrepreneur forgoes his own paycheck in order to pay the payroll or other necessary bills. Self sacrifice is the way of the entrepreneur.

When involved in a workout scenario, many different decisions are made, different then what would normally be done had the entrepreneur simply continued to survive….another well developed skill every entrepreneur possesses..

Here is one major change, I recommend that c0mes as a great relief, when entering the workout stage. The entrepreneur is entitled to a reasonable paycheck when managing the workout and wind down.

The secured loans are probably in default and thus will not be paid. Other unsecured vendor debt may be ignored, payroll may be drastically reduced, leaving adequate cash for a weekly paycheck for the entrepreneur to facilitate the workout for the benefit of both the bank,  the secured guarantors and of course the borrower.

This is always part of my workout strategy and is always acceptable to the bank. If we are doing an orderly liquidation for the benefit of the bank, which is part of the overall  strategy within my bail out plan, the manager/owner/borrower  is entitled to a paycheck and there is adequate cash to support it.

In the end when the workout plan is unfolding, the small business owner is paid to do the job by resources the business generates, cash that probably would have gone to the bank but is appropriately allocated for this purpose.

In fact I frequently discus he best way to liquidate accounts receivable and clearly the business owner or even the financial officer previously responsible for such collections will do the best job and the bank will do the worst job, if they will do it at all, thus the bank is typically willing to split the receivables in some negotiated manner such as one third for the business owner, two thirds for the bank.

It is not the end all, but it is a nice change as usually the small business owner is stretched to his limits at the point of workout and a little relief can go along way in reducing the short term pain.

Keep this in mind…its reasonable, and most frequently overlooked as the bank will not suggest this and the entrepreneur will  not know this is possible let alone appropriate and acceptable.

 

Admit mistakes, do not make up stories, tell the truth to the bank in a workout.

We are all imperfect.

We sometimes make bad decisions. We sometimes do not know information we should know. We make mistakes. We frequently keep poor records. We occasionally  communicatete poorly. We practise avoidance. We breach our word. We hide. We are all human.

In workouts with your bank and others, we tend to increase the damage by continuing these ‘bad’ business practices.

Then we compound the issue by promising the impossible, projecting unrealistic turnaround results and when we fail again. We get more defensive and more apologetic and onward the cycle continues eventually destroying all credibility and with it reducing the likelihood for a best case work out conclusion.

I have been there and have seen this repeatedly.

Recently I arranged a client discussion with the bank workout officer who wanted to find out what happened and what the borrowers plan for payback and resolution. He insisted in interviewing the borrower directly.

My client had made mistakes, had communicated poorly and was out of touch with her business. She was distracted by personal issues and frankly did not know what was happening, had no plan for debt payback and was struggling with the reality of losing it all.

Prior to the meeting I coached her urging her to follow one simple guideline and assured her if she dd this it would be a more successful meeting with a more successful workout conclusion, as we would regain the trust of the banker.

The rule I suggested was…’tell the truth, no matter what it is’.  If she did not know the answer to a question do not make it up, tell the banker you have no idea. If you made mistakes and decisions were inappropriate or simply wrong, admit it, accept it, and disclose it truthfully. If you have no plan or strategy, admit it.

So we had the meeting and she  treated the situation with candor, integrity and honesty, telling the banker the truth instead of what she thought he would want to hear. No one was happy with what was happening but the banker appreciated the candor and the truth and rewarded us with cooperation and support despite the disastrous losses we were all experiencing.  She admitted her errors and accepted the reality of the situation and with such candor won the cooperation of the banker which was sorely needed to yield an effective workout scenario.

Even in my coaching she wanted to make things up and sway from the hard truth, yet fortunately I convinced her to come clean and she did. The reults were positive.

I am certain many of you in defaulting positions are also avoiding the bank, hiding the truth and trying to project  an unlikely positive resolution to keep everyone happy as you fail miserably.

The point is, it is better to face the music and deal  honestly and candidly, it works out better in the long run.

This does not mean we should not arrange your affairs appropriately in your best interest nor protect yourself as deemed appropriate. It does mean that once done you should present yourself to the bank candidly and  completely, honestly and clearly accepting your responsibility and disclosing the ultimate failure of the situation.

This is the only way to begin and end a successful workout.

 

A more effective way to organize your office plan…try it!

Michael Bloomberg is an incredibly successful businessman. He has created businesses that have made him a billionaire. Thus perhaps his methods are worthy of review and consideration as his success is unquestionable.

In fact, I personally have long ago reached the same conclusion Bloomberg has  reached and have utilized this concept over and over to my total satisfaction, thus both Bloomberg and I highly endorse this simple but effective approach to office organization.

Here it is: We call it ‘ the bullpen’ approach to office organization.

An open floor plan without closed door private offices. I use office partitions, some call them cubicles however mine are large and well designed, attractive and inviting open for direct communication. Some are small and designed to dense pack the office population. Both work.

No doors and with 5 foot high partitions, it provides a combination of both adequate privacy and open visibility. Some use lower walls so everyone can see everyone, I prefer the 5 footers.

People can have enough privacy to satisfy this need and as well as adequate visibility and audio clarity to allow an open free flow of communication. Yes talking to each other without necessarily  leaving your desk, or having to penetrate a closed door office. It is more inviting, everyone is more accessible.

I find there is less of a need for meetings, as information and direct communication occurs naturally and frequently. There is a higher energy in the office as everyone is working more together then separately.

It is cost efficient to build out, and easily changed when necessary. But the real advantage is the flow of communication.

From a management point of view I have always had a similar office structure as everyone, for myself, no different then the others, making me more accessible as well as more aware of what’s going on during the day. I like it very much. It  gives me an opportunity to be more involved.

I do it. Bloomberg does it. Try it, It works

 

Its not automatic, the SBA offer in compromise process REQUIRES bank support

I have stated in the past that once we liquidate the assets, which we do with the bank, we then move onto the SBA for the Offer in Compromise, the bank gets their guaranty and on we go to work out the final stage, the personal guaranty, with the SBA.

There is however one more factor to consider and it’s a tricky one. The bank does in fact have the authority to block the offer in compromise application, preventing the SBA from even considering the application and leaving you trapped in limbo land forced to somehow convince the bank to allow you to move on to the SBA and the Offer in Compromise.

There are no standards, no guidelines and each bank is allowed to hold you hostage and shake you down as best they can to satisfy themselves that they have done their best to get the most out of you, regarding the payback of the loan…and then the SBA does it again with the Offer in Compromise process.

I have confronted this issue many times and it is purely a bank prerogative. Sometimes it never even enters the conversation and the bank merely processes you through to the SBA for Offer in Compromise consideration, other times they stop us cold and want more, and we have to find a way to satisfy this demand.

If no cash then a note, but some further consideration for he losses the bank will incur, despite the guaranty proceeds they will receive. There is no appeal, no higher authority, the SBA defers completely to the bank and this is the trickiest ‘no mans land’ in the entire process. Each bank that does this has its own requirements, and we work through this situation with care and caution. Some banks are easier to work this out then others, and the others can be very daunting indeed.

I am involved in a few such situations at this moment and while the borrowers have been cleaned out completely, and are losing their real estate, have lost their business and at the moment have absolutely nothing to offer, the bank wants something more to be satisfied they have done their best before allowing the Offer in Compromise to move on to the SBA.

This is a very difficult situation as we have nothing to offer, the borrowers have no income stream and have lost all their assets and remaining real estate is completely under water and in default.

The answer is as always, have patience, perseverance and we will work this out, and we will.

The point is that in this critical junction, we must remain focused, clear and steadfast as there is a path through this part of the maze, it simply requires unearthing the trail. This is the one part that we are in the proverbial ‘tunnel of horrors’ and must truly ‘work it out’ with skill and care.

There is always an answer and always a resolution, it is however not always clear and if stymied, it requires diligence, compromise and cooperation. The tunnel of horrors…a perfect analysis, as in the end there is light.

Call me for help if you are stuck in the tunnel, it may take some extra support to navigate successfully. 413-584-2581. Norm will arrange a no obligation teleconference.

 

The only small business bail out plan available…and it’s a good one.

We are it, our plan. The only small business bail out plan available.

The good news is, it is an excellent plan and will truly give you the second chance you need.

Here it is again, spelled out for you.

Significant debt forgiveness while protecting your business and personal assets from liquidation from foreclosure auction and total disaster.

Our bail out program provides you with the following potential results:

Successfully and appropriately transferring your assets into a safe harbor, stripping off all the debt, allowing the business to operate without debt, and then working out your personal guaranty for pennies on the dollar, depending of course upon your personal financial circumstances and condition.

We have been doing this for over thirty years, successfully. However now it is far more important and  absolutely necessary as small businesses are burning down all over the country from massively reduced revenue and bone crushing debt, and there are no viable alternatives, no government programs and certainly no cash giveaways for small business owners in trouble.

In consideration of the personal guaranties so many have signed for SBA loans, other bank debt and even IRS debt, beyond your business, your homes are at risk…that’s the stone cold reality. You may be willing to lose your business but few are willing to give up their home and this is a very real possibility because of your personal guaranty.

If not from foreclosure then without your business and with limited alternative employment opportunities, many will simply not be able to afford the debt service and thus will now lose their home because of an inability to support its debt service.

There are no options that work as well, or work at all.

Call me,  let me describe to you alternative strategies. 413-584-2581. Norm will arrange a tele-conference for us to talk.

 

Trust but verify…. always, but definately when buying a business.

I hear it all the time. People who have purchased businesses, invested a huge amount of their own money and then borrowed more to close the deal, only to then find out that the seller either ‘cooked the books’ or simply lied about revenue, sales, etc. and the buyer believed it. The buyer typically finds out way to late, after the deal closed and is sitting in the drivers seat, wondering were the revenue  went.

It never was there, is the usual answer, you were duped.

Rule one: Trust everyone but verify the facts. Hard verification, real verification, test the customer base, check the bank statements , see what was actually deposited monthly, one can’t lie about that one, its easy to check. Call the top ten clients and make certain all is well with them and the relationship, verify their purchases and willingness to continue. Any opposition from the seller regarding this communication is a clear sign tha all is not right. Insist or pass.

Do whatever you can to absolutely determine exactly what sales revenue is. This is the most common area of error a buyer makes, believing the bloated sales projections of the seller without personally  verifying the facts.

The second issues is when he seller cooks the books, making them appear to be better then they are. Its easy to do, but once again verifying monthly bank statements and talking to the top ten clients will prevent such scams from succeeding. Do it, do not be foolish its your cash and there is no possible reason to rely on the sellers information without verifying.

The cash business. ‘I do not deposit the cash,’ they say, ‘it’s here but I keep it so as to not pay taxes on it, everyone does it, but I CAN PROVE IT…..’ and on the story goes..

Here is the bottom line. First if they lie to the government they will clearly lie to you. So if the tax returns are not reliable and the bank statements likewise are also not reliable then either run the other way, or explain that you can only evaluate the business based on actual deposits and tax return statements, and actually filed and signed forms. If the owner is shorting them both then he either has to understand he is hurting the valuation of the business by doing this and cannot expect you to pay for phantom invisible income or you will simply not purchase.

Only evaluate the business on verifiable information, tax returns and bank statements are the primary indicators of real revenue. If he cheated the government then he pays the price when he sells as the value is what is reported not what he steals.

Furthermore there are secondary ways of determining real revenues. Look at the production records and the inventory movement, employee productivity, sales commissions, etc, all are direct indicators of what was made and shipped and what was paid for…all a direct determining factor of revenue.

If you do your diligence you will not be fooled.

There is absolutely no reason for anyone to get beaten by someone who has cooked their books or lied about revenue, it is far too easy to check it out and determine what the real truth may be. Failure to do this is iresponsible and you have no one to complain to, as you caused your own demise.

This issue occurs way to often and it is way to easy to prevent. Do not fall into this trap.

 

SBA to the rescue!! More money available for existing SBA borrowers having trouble paying their SBA guaranteed loans. Just what we need!

Of all of the administration’s small business initiatives, the one that they hope will most directly help struggling small business owners is a new “business stabilization loans” program that will ‘back bank loans of up to $35,000′ for business owners who are having trouble keeping up with payments on previous loans.  The fresh cash infusion is intended to free up money that business owners can then use to pay their bills and their employees.

The Recovery Act gave the SBA just 15 days to come up with guidelines for the entirely new program – a deadline that the SBA missed last week. The SBA will have more information available for banks and business owners as soon as possible, agency officials said.

We shall see what the brain trust does, it appears to be a nice idea for businesses that can still afford the debt service going forward but for some reason -wonder what- fell into arrears.

The real solution is a debt workout reducing the principal dramatically.  This is the only  solution.

If your business cannot make the current payments additional borrowing will only serve to deepen the hole you’re in -not improve the situation.  How does increasing their debt load by further borrowing help small business owners  survive the reduced revenues that is creating their problems? Simply put, it doesn’t.

So what’s he point of lending businesses -who are already having trouble paying their SBA debt service- more money that they must then pay back?

Makes little sense to me unless the SBA honestly believes the economy will turn around in the next month or two, thus restoring the borrowers cash flow, their gross revenues and profitability sufficiently so that not only the original loan, but now also the new loan can be repaid.

What are they smoking?

 

What is really happening in the economy, what to expect and why.

The material for this entry is gleaned from a blog I read daily and highly recommend which is called:

	“Mish’s Global Economic Trend Analysis” <MikeShedlock@gmail.com>
:

……it tells us what is happening…really and what to expect. Read it and plan accordingly, we are in for a long haul.

• The trouble with the economy is that the banks aren’t lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it.
• The banks aren’t lending because their balance sheets are loaded with “bad assets” that the market has temporarily mispriced. The reality: The banks aren’t lending (much) because they have decided to stop making loans to people and companies who can’t pay them back.
• Bad assets are “bad” because the market doesn’t understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are.
• Once we get the “bad assets” off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating. So they’ll sit there and say they are lending while waiting for the economy to bottom.
• Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears, and they’ll be working it off for years.

The above link above has a video of James Galbraith trashing the plan and more details on the five misconceptions.

 

Lost your business? It may be time to turn your hobby into your next business!

Unemployment is through the ceiling, this we all know, especially if you are either one of the 4 million who has lost heir job, one of the 12 million who has been forced into a part time position, or one of the millions of  entrepreneurs,  small business owners who has been put out of business and has few options, consider turning your hobby into a business. There are many benefits.

Maybe the message is , it is time for a change. The economy has forced you out of your job or your business and now you have an opportunity whether or not you were ready or asked for it, to re-invent yourself, change your life even more then it already is. Why not consider making your passion, your hobby, your new business? Why not opting for a new quality of life?

First of all, with the advent of the internet, a web site, a blog and perhaps a video or two, you can market to the entire world for an extremely low cost. You can work out of your home, not only keeping the overhead down, but enjoying many advantageous tax deductions. Its a low cost start up as you probably have been doing this for years and are already established.

I can tell you hundreds of stories of women who have turned quilting into a business over the internet, world wide, men who have turned fly making into a huge success, others who raise and ship valuable orchids, expensive tropical fish which they raise, art, graphics, crafts of any sort, writing, poetry, you name it if you do it there is a market for it.

The home office space usage is now a deductible expense, (see home office deductions blog entry).

Most importantly you are an expert in something you do and can develop this into a positive cash flow which in the end may become your long term business strategy or in the short run may help you maintain your existence as you prepare and determine your next venture, job, or business undertaking.

Treat it like a business, write the business plan, do the cash flow projections and then launch.Why not, you must do something to survive this downturn and marketing your hobby may be a reasonable direction to take.

Internet marketing is turning millions. People buy product, service and information. Information may be one of the largest growth opportunities available as so many are wanting expert instruction about so many varied topics, and since the internet is wide world, and based on the long tail theory ( see other blogs entry’s on this subject) The short paper on how to do it, with extremely low cost and extremely high profit can turn  into cash overnight.

While selling the widget is profitable, selling how to make the widget may be even more profitable.

Do it, I can only assure you many whom have tried have turned their hobbies into a lucrative home business. Many have changed their life styles and are enjoying it far more then their high risk, high stress work.

If not overly successful, but at the very least creating a little cash,  at least you have greater tax benefits and have enjoyed your time doing it while you look for the next job, or business opportunity.

Turn change into an opportunity, get in front of the train, but do not let it run you over. Try, what other options do you have at the moment? What have you got to lose?

 

What we can learn from the greatest entrepreneur of all.

I recently read 1776 by award winning author David McCullough. It was of course the story of the first year of the revolution. During this year Washington was appointed the  commanding officer of the revolutionary army. This in and of itself was a huge leap of faith as Washington had extremely limited battle experience  and thus had absolutely no idea as to how to strategize and win a large scale war, or even small scale skirmishes.

Worse yet, he had few experienced leaders capable of handling the men in the field. His men were completely untrained, had few arms and less ammunition. The men came and went as they pleased depending upon weather, and family needs at home. Sickness often disabled as many as one third of his men at any given time.

Even worse was the fact that they were confronting the greatest Army and Navy in the world at that time, extremely well trained, very well armed and with a Navy of over 400 ships armed with hundreds of guns. The revolutionary forces had no Navy, few guns and  was badly out  numbered by about 10-1.

In the winter, the revolutionary forces had no tents, uniforms or even clothing or shoes to keep them dry and warm. It was in a word, pathetic to consider this rag tag band of farmers and hunters, and a few aristocrats an army. It was an undisciplined, untrained, unarmed, unequipped, band of passionate men who fought amongst themselves and had no idea as to how to conduct warfare.

Washington’s strategies were most often wrong. His lack of experience led him into one defeat after another, yet he persevered.

That is the quality that an entrepreneur truly owns and utilizes most effectively in reaching the desired goals, not experience, not intelligence, not skill, but perseverance, refusing to lose, rejecting defeat, insisting on reaching the goal no matter what the odds, not matter how slim the likelihood of victory.

The revolutionary  leaders had bet everything they owned including their lives, and their families, having given up power, wealth and comfort to battle against the most formidable force in the world knowing that should they lose the war they would surely all hang, if the lived long enough to be captured, yet against the most impossible odds imaginable they persevered.

This is the true hallmark of an entrepreneur, perseverance, and George Washington in 1776 demonstrated this trait to the greatest degree imaginable.

When the going gets tough, as it is today for most small business owners, we can all take a lesson from Washington, as HE WAS THE ULTIMATE ENTREPRENEUR. He gave birth to the most amazing business the world has ever seen against the most severe odds any entrepreneur ever bet against and he won, giving life to…America.

When your situation seems grim, and the challenge is seemingly impossible, too difficult to go another day, remember George Washington and the perseverance he exhibited against odds we have never personally experienced. Then do it. Persevere. He won so we could enjoy the freedom to fight our own battles safey and securely. We can never give up or we will be dishnoring his brilliant entreprenerial victory.

 

SBA encourages participating banks to provide payment deferrals. If only it were so!

Below is a press release from the SBA from last October. It is interesting because I am working with over 50 banks handling defaulted SBA loans, and few have apparently gotten this announcement as few offer anything other then bone crushing collection efforts once they reluctantly provide 3-6 months of interest only payments, the only relief I am aware that is being offered. Occasionally I see deferments, but only occasionally.

I show you this and encourage you to print it out and show it to your banker, who knows maybe someone will pay attention.

News Release Release Date: October 20, 2008 Release Number: 08-105 In an Effort to Help Small Businesses, SBA Encourages Lenders to Offer Loan Deferment Relief WASHINGTON – In response to the financial crisis, the U.S. Small Business Administration today announced it is strongly encouraging its participating 7(a) lenders and Certified Development companies to work with business borrowers to provide them with the flexibility they need to keep their businesses running during these difficult economic times.  As access to credit and capital has tightened, many businesses face increased challenges in meeting their financial obligations.  This is especially true of small businesses hit hard by the recent economic slowdown that are now unable to make payroll, or purchase essential inventory.

SBA is reminding participating lenders they have the authority on a case-by-case basis to extend temporary payment relief for qualifying borrowers with 7(a) and 504 loans who are struggling to make their payments. ”The SBA is here to help small businesses during these difficult economic times. We are encouraging our lending partners to follow suit by extending three-month payment deferments on their SBA guaranteed loans to qualified borrowers who need relief,” said SBA Acting Administrator Sandy K. Baruah. “We recognize that small business owners are faced with challenging decisions right now.

By providing three-month deferments to qualifying borrowers who are struggling, our lending partners can help small business owners free up the capital they need to maintain their businesses.” If a deferment longer than three consecutive monthly payments is needed for a loan, borrowers can work directly with their lenders who in turn will work closely with the SBA to identify the best solution.

At the same time, the SBA is asking its lenders not to broadly call borrower loans due to changing financial variables, such as fluctuations in personal credit scores, declining collateral values, and reduced home equity, which are currently affected by the disruption in the financial markets.

The SBA has issued a notice that will be distributed widely to its lenders and 120 field offices encouraging them to look at these cases individually and to work with individual borrowers in order to facilitate the longer term success of these small businesses.

If only it were true…

Call me if you’d like some help, we have successfully negotiated significant reductions in debt.

Call Norm at 413-584-2581 he’ll arrange a no cost no obligation tele-conference for us to discuss your situation and determine the best strategy.

 

Why your trade magazines are one of the most valuable tools imaginable.

I have used this concept repeatedly throughout my business career and it has brought me valuable dividends repeatedly. It is a must do for everyone exploring new business.

Read all the trade magazines possible, about your industry, trade or market. There is a wealth of information that is important for you to know waiting to be read.

There are two broad applications to this principle.

The first being appropriate if you are entering a new industry or trade, for any purpose but presumably to do business in a variety of ways. Possibly to sell into it. Possibly to become a player in it. Possibly to purchase a business in this industry. Perhaps you want to do a start up in this industry or trade or market.

The second reason is because you are already in this industry, trade, or specialty.

Here is the principle: By reading three months of all the trade mags applicable to a particular industry, you can become an expert with vast knowledge and easily perceived as someone who has ‘done their homework’ who is knowledgeable and aware. You will learn what is working what is not working, who the players are and what they are saying, what is selling and what the future may be. There is unmeasurable wealth lodged between the covers of three months of magazines.

Here is what you do. First read all the articles, there will usually be a few about successful business operators being interviewed. Within these articles you will learn everything you need to know to be as successful as the best in the industry, because they will answer this question unabashedly and clearly.

Second study the ads, this will tell you what is selling, who is selling it and who is successful at it.

Thirdly read the letters to the editor and the editorial statement for the month and this will put you in touch with what is relevant to the trade that moment. The current issue of the day.

Read the classified adds, this too will reveal much and educate you as to what is selling for how much as well as give you an idea of the condition of the industry.

Three month worth and you will be as knowledgeable as the best in the industry and will have answered all your questions you may have. In addition it will educate you as to whom to call and talk to, where the power is and what is the best angle for your entry, if at all.

All this with three months of  magazines. If it is a larger industry you may be fortunate enou