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.

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Fail proof new product and service development…for pocket change.

Minimum Viable Product, a new phrase, a new idea, but it makes a lot of sense. It works like this.

Historically, the release of a new product occurred after a significant investment in expensive development and then a heavy investment in actual production, usually all behind closed doors. A big secret until the day of release and the big announcement, hoping, betting the company’s future and possibly the company itself, that it will be well received and will bring back the return expected and projected….and if it doesn’t, then what?

It has certainly happened enough times.

Now the idea is to meaningfully test without making the huge investment in development and production. Finding out if it will really sell or not.

In the past market researchers and small business owners would ask around to customers, distributors, whomever, if they would buy this new product. Just as frequently they would get positive feedback supporting the go ahead decision, and thus dive into this major investment as every new product or service release requires.

The operative question being “would you buy this?”

The important point is that frequently despite a person saying he would buy, businesses learned this opinion may not actually transfer to a real purchase.

Now with the economy being as depressed as it is, small business owners cannot afford to launch failures and the cost of development is too high to speculate on.

So we use the Minimum Viable Product development process as follows:

With the advent of the Internet, smart small business owners have figured out that a web site page can be made for very few dollars and ideas can be marketed for sale without any investment in development or production at all…yet. If enough purchasers are willing to buy as indicated by a purchase request, an actual order then make it and ship away, knowing in advance it is a winner.

No sales, drop the idea or product.

With this concept you no longer ask for opinions. You can count the orders and determine if interest is high enough to warrant the investment.

You can also figure out price points, and valuable features all by what is offered and what is purchased.

Clearly there is the issue of the time involved from order to shipping, if you have not yet manufactured, but presumably you have it all figured out.

No expensive mistakes, very low cost to test, and very reliable results. Makes sense. Since new product and services are the lifeblood of business, this concept has much value and power.

Use it.

 

Turn defeat into victory!

Your revenues are dropping like a rock, yet your overhead is always increasing. The debt you previously took was supportable with yesterday’s revenue…but no longer, not with today’s significantly reduced revenues. It is crushing you.

We understand……
Yes, we get it.

We feel your fear and your frustration.
We know you want to pay your loans and bills.

We understand how hard it is to not take a paycheck home.
We know how hard it is to tell your wife she cannot use the credit card anymore.
We know how difficult it is to fire your loyal workers who have become part of your family and depend on this job for their families’ survival.

We know how angry you are with this situation.

We understand that you are being forced to your knees by forces not in your control, and caused by other’s greed, and you are really pissed off about this.
We get it.

The greedy bastards that sold us out pulled the rug out of the small business world by causing the tanking of the economy, forcing us all to face our worst nightmare…failure.

I have this to tell you: It’s not your fault!!! You have done nothing wrong, you have made no mistake. Lose the emotion and take action.

There is an option. We have a plan.
We will strip the debt of your business and preserve the assets so the business survives… and drastically reduce your personal guaranty.
This works, for most upside down businesses.

Take back control, turn defeat into victory!

 

Post #600: A tribute to the business owners who have fought and won. Hoohah!

We spend an enormous amount of time, energy and effort fighting the battles to save our clients businesses, their homes and their lives,  and an  honorable battle it is.

Our belief and experience, based on enormous contact with many many small business owners, is that none of our clients would like anything better then to be able to pay their bills and loans, work hard and provide for their families and support the jobs they provide.

No one wants to downsize, lay off their people, and workout their loans. No one. But you must in order to survive. We are perhaps one of the few businesses in the country that concening our clients through this huge workout transformation, but it is our clients that are the real heroes tenacious, committed and willing to do whatever it takes to succeed.

Today, on the 600th post I have written on this subject  I want to pay tribute to the brave men and women who asked us for help and then trusted us as we instructed them to jump off the cliff….and believe we will catch them and bring them to safety.

These business owners  are now successful, their business being saved, their  families and the families of their employees now enjoying a sense of security and well being. HooHa! It is a worthy and honorable battle we fight.

One business at a time, giving them the second chance they deserve. There are no other bailouts, there are no other options, there is no other opportunity…one business at a time, we will save as many as we can.

I tip my hat to these warriors, they are the backbone of our country.

We are deeply satisfied and honored to lead the way and demonstrate to all those  small business owners in the same distressed position as my clients once were, how to succeed in this downturned economy.

Hoohaaaa! There is light if you know were to look. We have the plan.

 

Hold harmless and indemnification agreement. Whaaat?

Hold harmless and indemnification agreement: a phrase we have all heard of but probably have little idea of what it really means. Why should we be aware of it, use it when appropriate, and challenge it when added to an agreement, especially, when it is not to your best interest?

In many situations a partnership, or co-owners in an LLC or corporation enter into an agreement with a third party, could be the bank, an investor, a landlord, a vendor, any one to whom you are financially obligated.

Then one of the two or more guarantors, choose to leave the entity, exiting the partnership, corporation, or LLC. The problem is the third party to whom you have both signed personal guarantees is unwilling to release the exiting partner, co-guarantor, so what can that person do to remove the continuing obligation?

Not a lot, as the third party has any incentive to let the guarantor out of his guaranty.

In this situation, lawyers have come up with a reasonable alternative to resolve this matter, and it is a hold harmless and indemnification agreement.

What it means is the remaining partner, co-guarantor, agrees with the exiting partner to “hold him harmless”. In other words, remove his responsibility from him for this obligation, by “indemnifying” him, or paying him back for any losses he may incur because of this debt.

The intent of this agreement is to circumvent the reality that the exiting partner cannot exit an agreement he made with a third party but the remaining partner can cover his losses should they occur. Thus if the bank, or landlord or whomever experiences a loss from this relationship, and claims are made on both guarantors, the remaining partner will pay for and cover any expenses incurred by the exiting partner.

The reality is the exiting partner is still responsible and could be forced to pay on his guaranty, but then the remaining partner would be obligated to cover his costs and expenses.

Of course, the real problem and issue is that while it all sounds good, in all reality if a guaranty is called, the likelihood that the remaining partner has the cash to cover the exiting partner is very low. If he had the cash the debt would have been paid before the guaranty was called in, thus it really is usually an empty promise that cannot be implemented. It may have been well meaning but usually impossible to enforce.

In the end the eating partner has a cause of action, a law suit against his partner for breaching his hold harmless and indemnification agreement but really that is a lost cause at the time it is being considered as clearly the remaining partner is out of cash.

All too often I see this clause snuck in by cagey lawyers to unsuspecting partners who are dissolving their relationship, without the remaining partner really understanding what he is committing to and if he did understand would certainly not agree to it. When you see this phrase, and are on either side of the deal, remaining partner or exiting partner, be cautious, inquire as to its meaning and make certain it is what you want to do. If you are the exiting partner, be aware it is usually an empty promise and if called on is unlikely to be paid on.

Thus in all reality, if you signed a guaranty, and want to exit the relationship, chances are very good that someday you will have to answer to your guaranty and will NOT find success in your ex-partners promise.

Call your lawyer when this happens.

 

We found the enemy and he is us. (pogo) Part #2

Yes, once again, we are our own worst enemy.

We are in a deep dark recession, revenues are down 20 – 80% depending upon many factors, yet you take huge losses instead of responding as you should. You do not downsize quickly enough or deep enough and as a result you tank yourselves.

I met with a potential client who drove up from NYC to talk, meet and enter into a contract. After much discussion about his issues, he lamented that he did not downsize fast enough or deep enough. He reported that six of his employees whom he believed he needed, had little to do and eventually began to underperform even for what they did have to do. Their attitudes got defensive and argumentative as everyone covered up the reality, they were not needed and they eventually looked for and found other jobs and quit or were laid off.

Further as his revenues plummeted from $5 million to $1.5 million he continued to allocate larger and larger amounts to debt service of notes he could not possibly afford, wasting vast amounts of capital rather than supporting his business appropriately and effectively.

The score? He computes he wasted approximately $500,000 on these two mistakes, almost costing him his business, and would have, had he not met up with us.

We can stop the waste of cash now, but the damage has been done and now he has a darker and larger hole to climb out of…for no good reason…he did it to himself.

The moral of this story has been repeated throughout this blog. We are in a semi permanent down turn. Downsize deeply and immediately…now. Workout your debt today.

If you need help, call Norm at 413-5484-2581. He will arrange a no obligation teleconference for us to discuss your options.

 

Ok, you lost your business and cannot find a job, start another business.

Yes, times are tough. You had no intention of losing your business, and further have no desire to get a job. You have looked high and wide but as discussed in other posts, you are unemployable. No one wants an older ex-entrepreneur, a previous business owner, as an employee. It is a disaster in the making. You have a tough road to go if this is your strategy.

I believe you have only one option…start another business, but this time, do it right, make it work and earn your survival money as you know how, doing what you have always done, running a small business.

Could be a small one man show, Internet-based, service-oriented or product oriented, or perhaps selling information on the Internet; a huge opportunity, as after all you have a life time of experience.

The point is, what choice do you really have, if you agree you are unemployable, having been searching for a long while with no results, and unemployment cannot run forever, and it is not enough anyway, what is left to do?

Start another business, small, tight and profitable. It is what you know how to do best. Think, what expertise do you have that others would want to know about?

It is not that hard to put a website together and experiment. Video is very inexpensive and even if your writing skills are below par, video works better. Search the web for the many blogs that will teach you how to do this step by step. It is a huge billion dollar industry with very low barriers of entry.

Whatever your secret dream or life time expertise, find your niche market and explore it, and then exploit it.

What other choice do you really have?

 

It’s true, some business owners are doing better. Why?

I talk to small business owners where ever I go, where ever I shop, and whomever I speak with, and while it remains true the economy is far from recovering, we have not yet bottomed out and have a ways to go, there are many examples of business owners doing better.
It is impossible to generalize as each situation tends to be unique but overall I can take a few lessons away from these conversations as follows:

1. It’s not about the growth within the market place, that is not what is happening, it is about one businesses grabbing an additional share of a smaller market, that IS what is happening with many of those who are successful. It appears to be a matter of doing a better job of adjusting to the existing market and attracting more of the remaining business that is available.

2. It is also about the consumer believing he/she is getting a fair deal, good value and quality merchandise. Everyone is involved in adjusting their consumerism attitude where we collect goods to feel better. Now they are buying what they want and need but far more selectively, and shopping for a good experience which includes many aspects, price, guaranty, shopping experience, a deal, whatever it takes.

3. Not everyone has lost their job, not everyone is dealing with reduced pay. There remains a huge market of well off, successful consumers who have more than enough disposable income to continue to afford their wants and needs and purchasing whatever they choose whenever they want to, and these people remain available to market to and earn from. It is not just the high end; it is throughout the maize of consumers. While many are losing their jobs the remainder, the vast majority are doing fine, even better, in many cases better than before. They may have changed their buying attitude but they are available for the right pitch.

4. With so much of the competition being weeded out through closings, the last man standing theory is putting the remaining small businesses into a better and better light. A huge wave of buying local, buying from smaller stores and regaining the quality relationships that were universal is returning. The shopping experience has changed and quality relationship building is back in the mix, trust is being reestablished. This is where small business can out-compete large box stores and take back a percentage of the market they lost to them previously. Reconsider the customer shopping experience received when working with your business.

5. The objective now is to lead, not follow. You cannot succeed if you are responding to your competition, you can win if you are out in front, taking the lead and forcing your competition to respond to you. It’s time to put on your happy face and rock and roll, the market is yours for the taking, it’s a hard job but what other choice do you have?

The tide is turning against the big box stores and the weaker small stores. Stand out and take the lead, you will be rewarded.

No time for excuses, the opportunity, as always, exists for those who dare to excel.

 

Working 24/7 and proud of it? Don’t be, its a mistake.

I just exchanged emails with a broker friend of mine who arranges financing for some of our clients, and he had just heard back from a lender this afternoon and wanted to get me the good news.

I responded of course, and in the communication, he mentioned how impressed he was that the man was working on Sunday afternoon as if it were a regular work day….getting things done. Cool.

It did not sit right with me and I responded back immediately, “no not cool”, “In fact not only am I not impressed, I am distressed.” I no longer trust him or his judgment. I thought about it for a moment or two and then went on saying, that if his business is so needy that he must work 24/7, and if he has not yet figured out how to expand without working 24/7, then he lacks serious management skills and thus I question his entire context and skill level, ability, likelihood for success.

I am running a rapidly growing business doing significant revenue and I spend my weekends with my family. Most evening are with my wife although I do allow for necessary meetings and outings of various matters regarding business during the early evening hours during the week and have a busy schedule for certain. I am successful. I do not have to ‘work’ 24/7. I do not make non-emergency client calls on Sunday afternoon as if it were business as usual. My business is under control.

My brokers lenders business is not under control, or why would he be making normal business calls on a Sunday afternoon? Check it out, the answer to your success is NOT locked into a 24/7 schedule…at all.

No, no, no, you are either escaping, avoiding reality, hiding, concentrating on ‘the work’ to numb the fear, maybe all the above, thinking that such a herculean effort will result in success and besides it is your standard, yourself expectation to fight to the last breath.

Spare me, can we do this a little more intelligently then that and with little less emotion? Lets create a plan and implement a successful mission.

Working 24/7 is an indication of a runaway, out of control train, a wreck about to happen, a cry for help, a clear need for intervention. No plan at all. This does not mean you cannot think about your business during off hours, of course you can and will, as do I.

If this is you, breathe and ask yourself… What are you doing? What is your plan?, How are you going to implement? Do you have the cash requirements?

Then proceed…and go home for dinner….and yes think.

 

We fought the Dept. of Justice and won.

You, of course, all have heard our claim that we are always successful in resolving our clients’ debt workouts. We are sometimes put to an extreme test. Recently we were challenged in a rare exception to our typical representation as our clients have been litigating with the Department of Justice for over two years regarding a $1.2 million debt to the SBA. The bank had long ago liquidated the assets and the remaining issue was the personal guaranties, as it always is. They were about to finally go to trial, having stalled as long as their exceptionally talented attorney had managed.
The problems were many. They had no way of paying such a debt and the US Attorney handling the case was incredibly rigid, uncompromising and unwilling to even consider a discounted payoff or resolution, nor would he even allow a term payment agreement so the men could service the debt over time. Furthermore, their resources were extremely strained and the legal fees were also wiping them out.
Bankruptcy was not an option for a variety of reasons so they were in a jam.
However in their desperate search for an answer, they came across Second Wind Consultants and our web site and blog.
I listened to their story and suggested it was not too late and that our strategies could work this out successfully, so they retained our services and off we went, hell bent for victory.
I have written in a previous post about the incredible resistance the US Attorney put up, even refusing to deal with us at all. Additionally at the required pre-trial settlement conference despite significant financial disclosure the US Attorney glibly stated he believed, having reviewed the financial information, that each man could individually handle the pay off of the full amount of the debt, $1.2 million.
This was indeed going to be a challenge.
Our attorney had me qualified as an expert, so my opinion would be acceptable in Federal Court as evidence. My team went to work and produced the presentation we typically design for SBA workouts and I went to court ready to do battle.
A battle it was and in the end the Judge applauding our presentation and awarded us a total victory as follows:
$25,000 per man up front, $15,000. Payable over time, to be worked out with the US Attorney, reducing a $1.2 million dollar debt to $1,080,000. Ten cents on the dollar. A little more than what we like to pay but under the circumstances, a terrific resolution.
The best part of the event was the comments made by the judge noticing the professionalism and passion we demonstrated on behalf of our client. He stated ‘there should be more like us doing the job we are doing.’
I will proudly continue to tell everyone who calls us, that we reach a satisfactory conclusion 100% of the time.

 

What bills do you pay when there is not enough to go around.

It is a very common question and more often than not answered incorrectly.
First there must be some context to set the stage for the strategy.
The rule is pay what is required to survive another day, to fight another battle.

The landlord? No, definitely not. Do not pay this bill. You can easily get 90 days without payment and then if cash flow has not improved you are perfectly poised for negotiating forgiveness and a reduced rent payment going forward. Landlords are in no position to be firm, there are no renters standing in line.

Of course do not pay debt service under any circumstances; it is a huge loss of capital with no positive results. Additionally, this sets the stage for a debt forgiveness workout.

Credit cards can be worked out but only if in default for over 90 days or more. Do not pay them in times of reduced revenue. Unsecured creditors, vendors, unless required for operations like the phone bill, utilities in general, and other such requirements, do not pay unsecured creditors. There is always a substitute supplier for any item you may need.

Payroll and payroll taxes should be paid without fail. Reduce payroll by reducing your workforce.
Advertising is usually the first to go, but reduce carefully. Make certain you do not tank your sales by eliminating important revenue-creating advertisements. Definitely eliminate nonproductive advertising that can be measured by results.

Do not pay equipment leases. It will take many months before there is even a threat of repossession and the debt can be worked out, negotiated down.
Car and truck payments will take months to repossess, so do not pay. But be prepared to catch up in 90 to 120 days.

Insurance? Pay if you can, it’s a bad bet to default.

UPS? Do not pay; can always use Fed Express.
Here is the point: When cash is inadequate to support all your overhead, pay ONLY income producing requirements and survival needs. These are your marching orders.

Follow this and you may survive to turn your business around or work out your debt.

 

Yes, you have a responsibility to present yourself in a light most beneficial to yourself!

I review many self implemented Offers in Compromise to the SBA, Banks and other creditors, and I am frequently amazed at what I see.

Friends, are you not paying attention? You are in default. You are being foreclosed on or collected against, at the very least. You are facing liquidation and possibly foreclosure. That is the fact pattern.

Yet despite the clear intent of the bank to clean you out for its own benefit, many of you present yourself ripe for slaughter without lifting a pencil or an eraser in advance to prevent important assets from being liquidated and without improving your position or making certain total calamity and destruction does not occur.

We are not sheep being led to slaughter. Do not act as if this were the case. We have a deep responsibility to ourselves, our employees, our families and our need to survive to fight another day.

Allow me to humbly suggest that despite the documentation and the preferred position the bank takes all for them nothing for you, they too must play a role in your downturn as they too were part of the problem and have provided no solutions. Yes you owe the money, yes you failed to pay it back as agreed, but this is not a moral issue, both sides of the deal were fairly represented and took risk. Both sides must absorb a fair amount of the cost and loss.

You have the same obligation as the bank but the reverse side. The bank intends to get as much as they can from you. You must protect as much as you can from the banks liquidators.

This is fair. This is just. This is the right thing to do.

For example, do you leave the remaining $8,000.00 in your savings account to wait for the bank to ask you to hand it over? Or do you pay your mortgage and your property taxes as well as your insurance bill and your utilities maybe early maybe for an extra month as you know you will be out of income shortly. Is this cheating? No it’s preparation and self protection.

It is also presenting yourself in the best light possible for your own survival.

Is it appropriate to leave your child’s education account which you are a co-signor on, to be given up to the bank because your name is on the account? No take your name off it, this account has nothing to do with your debt to the bank and should not be subject to liquidation because you did not realize the issues at hand.

Should you leave the cash value of your insurance policy alone, ripe for plucking by the bank? Should you withdraw it in advance and better you’re going forward position as that is in your family’s best interest?

Here is the point. Believe me when the bank says they are in collection mode, they mean everything they can get, they will get. My advice is that within the rules, no fraud, but with reasonable business and personal activity, you have a right to protect yourself and to present yourself in the light most beneficial to you, not the bank.

Let’s get real, the bank is not your friend in foreclosure, it is not your job to give them the shirt off your back, which they would have you do. Protect the shirt at least. There are many ways to protect you. Doing it yourself without the skill and experience is not the way to go.

Call if you need help. Norm will arrange a no obligation teleconference for us to examine your options.

Call 413-584-2581.

 

Yes you must be in default to enter into a workout…universal default!

One of the more ridiculous practices, but it is very true; you must be in default to engage in a workout negotiation. The bank’s logic being, why negotiate a reduction if the borrower is current; obviously they can pay, they surmise.

Unfortunately, any intelligent attempt to demonstrate through projections trends, advance orders, broken contracts, declining orders, etc., falls on deaf ears…no workout discussion until default. Despite the additional reality that if a workout were entered into before default and total destruction and loss, it is possible that greater amounts of borrowed money could be paid back as well as keeping the business going.

With credit cards, it is required that at least 90 days of default is required before a workout will be discussed.

One frequently misunderstood situation, when working out any secured note, or debt, either with banks or leasing companies, if current on credit cards, this infuriates and prevents successful workouts with defaulted secured notes and loans. The banks and lessors and collection agencies or lawyers can check your credit activity and can see if you are current on any other debt…being current on other debts, especially lower priority debts creates a difficult problem for the workout.

When in workout, be in default on everything.

 

Make your employee cuts before all your employees are out of work.

Small business owners are all humans, we all care about our families, friends and yes our employees.

In many small businesses, the employees become family to the owners after years of working together side by side in the trenches of small business warfare.

When revenues decline, employers are hesitant to lay off or permanently reduce their workforce, preferring to hold on to excess labor or staff, pay them to work inefficiently or with minimal productivity, but the owner is concerned about their well being and care about their families, so they hold to them, waiting for the downturn to turnaround when everyone will be needed again.

The small business owner frequently kids himself into believing that he cannot do without this base core of people and that each one is necessary for the business to succeed.

There is much to be said about how to overcome these issues but the point here is that if you act irresponsibly to the business, carrying employees who are not needed but kept on because the owner cares, can result in a steady erosion of capital leading to the demise of the business…putting everyone out on the street without a job, including those who should have been released earlier.

A business must be predominantly run by its numbers. A too large employee base can quickly kill a small business. Holding onto employees because the owner cares about them and their families can result in the entire business being forced out of business causing far more damage to far more employees.

While I appreciate and acknowledge the sensitivity and caring demonstrated by an owner willing to carry employees because he cares and not because they are needed, it is a foolish decision that only wastes capital and destroys businesses.

Be the bastard your laid off employees will call you. Save the remainder of your employees from destruction, save the few that are critical to your survival. It is the only responsible act you can indulge in, if you truly care about your remaining employees.

Watch your numbers and fire as many as are necessary to balance your books, as soon as you are clear it is not a momentary dip, and survive.

We are in a deep long term downturn, downsize as soon as possible, and make your employee cuts accurately, as deeply as required, including and especially excess and thus unnecessary employees.

 

The collateral and the business is yours until the bank forecloses.

You own the collateral, assets that are valuable as they make you money and are the heart of your business. It may be collateral for your loan, but it remains yours. Therefore you must exercise complete control over them for as long as possible. Of course. So only you can sell an asset, or all your assets, or your entire business as a going concern…NOT the bank.

This is an important fact. The only way the bank can take over control of your assets, hold title, and thus be able to dispose of them as they choose, is either with your permission or through foreclosure, a process controlled by each state differently. Thus any request or demand that you do anything with your assets, such as sell them, is a breach of their fiduciary duty to you the borrower and should not be tolerated or adhered to in anyway, unless the borrower believe it is in his/her own best interest.

The bank has little opportunity to market or even list property for sale but always opts for the liquidation auction as it is deemed an adequate effort to satisfy their fiduciary duty, even if it brings in the lowest possible price, with the most expense. Its as quick as possible, final and is defensible.

Banks do not want to foreclose and take possession of assets. Understanding this is a negotiation advantage. You control the assets until they foreclose.

 

One reason why a third party expert, a consultant, can accomplish more than the borrower.

Seems silly, that in many instances the borrower has already attempted to achieve various workout accommodations yet failed miserably, yet with the same fact pattern, same borrower, same everything, the ‘third party expert’ can accomplish what was already proposed and refused and in many cases do a lot better.

There are a number of reasons this works out in this manner, but the basic logic that supports the entire approach is that the borrower is the bad guy. Not to be trusted, having breached his word many times. Having breached the agreement making everyone looks bad especially the banker who wrote the loan.

Unfortunately, but true, the breach of trust makes it very difficult for the banker to do business with the borrower especially when the borrower is now asking for large concessions.

As a third party expert, my opinion is regarded with a degree of respect, professionally delivered and supported by my confirmation of the situation which while obviously in favor of my client at least comes to the banker with a degree of clean credibility. I did not breach the agreement nor break any promises; the borrower did, so we can do business despite the borrower’s bad behavior…so it goes.

Furthermore, the third party expert knows how, and what information to deliver and in what form, so the banker can more effectively do his job.

This is not about selling out the client and serving the banker, not at all, it is about doing business with a win-win attitude and full cooperation within that context.

Then add expertise and experience, the kind that seasoned workout specialist can bring to the table and the banker can rely upon and now we have a deal in the making… progress.

Yes, bankers are unfortunately frequently driven by emotion and the defaulting borrower is not the banker’s favorite person. In fact there may be significant ire created by the borrowers default and ensuing stories of turnaround success that never materialize, leaving the banker with the conclusion that the borrower is a liar, trying to get away with something, incompetent, and certainly not to be trusted…How can the borrower expect fair treatment and a successful workout under such circumstances.

There are many additional reasons why a third party expert can accomplish more than the borrower, which goes to the skill and experience of the expert, but the entry point, the difference between the expert and the borrower begins with understanding that the borrower is the bad guy and the expert is the good guy…it only gets better from there, if the expert is truly good at what he does.

 

Would you do your own brain surgery? Then do not attempt to do your own workout.

I speak with people all the time that decide to do it themselves. They figure they can fill out the forms themselves and save the fee, so why pay for expert opinion to represent them in negotiating a workout, ‘after all what could be the big deal, I have nothing to give them.’ How wrong could one be.

First of all the mere filling out of the forms is hardly the complete job, there is the negotiation with the banker representing the best interests of the SBA, and there is knowing what works and what does not work.

We have represented people who are out of work, without savings and with homes in default and yet the SBA representatives have demanded full payback of over one million dollars stating they believe the borrowers can repay in full. How would an inexperienced borrower respond to that? I ask. We eventually worked this problem out.

There are the written standards, very hard to find, actually impossible. There is also the unwritten standards learned only by doing enough of these workouts to learn what works what does not work. I see borrowers offering way more then they should and still getting rejected. I see borrowers leaving cash in a joint account for their child’s college eduction only to have it swept by the bank, they did not know. I see borrowers making weekly deposits into their 401k or IRA and failing to understand that this is not acceptable and thus will result in additional available cash to support a large long term note. Oops! I see borrowers using the wrong type of appraisal, to their great loss, but how would they know?

I could go on and on listing the errors people commit when representing themselves in working out their defaulted SBA guaranteed loans. But they decided to do it themselves and thus they find out what they did wrong on their own workout and fail to achieve their goals…and then what.

Even worse, I see borrowers in default looking for expert guidance and not knowing what to do, seek council from their lawyer, who has probably never done an SBA workout and has no idea how so he or she also experiments, doing what seems right but without knowing how.

I have cleaned up more mistakes made by lawyers doing their best but not knowing how to deliver a successful conclusion, so ultimately hurting their client.

Here is the point. Do not do your own brain surgery, get a specialist and trust your life to him or her. Likewise, do not do your own workout and do not hire an inexperienced representative who does not have expertise. Never do it yourself.

Call us, we can help you. We have done hundreds of such workouts successfully and safely, with both SBA guaranteed loans in default and traditional secured loans from any bank. We know how to do it. Successful workouts can be done it takes skill, imagination, creativity, and expertise. Hire a professionals experienced in this area.

Call Norm, he will arrange a no obligation teleconference where I can propose a specific strategy to resolve your debt issues.413-584-2581

 

Hard money loans, what’s it all about?

We all know banks are not lending money.

We also know that the few opportunities that may exist fr borrowing are made much more difficult by the banks requiring better credit then ever, and many of you have suffered credit hits because of the current downturn, reduced revenues and increased overhead expenses.  Thus it is even harder to get a loan.

This is a problem.

Aside from normal operating requirements requiring lines of credit, and the desire to make acquisitions of many sorts, there is also a great need for capital to fund workouts. Workouts reduce debt paying small amounts in consideration of large reductions of debt. But you must be able to support the cash requirement or it cannot be done.

Frequently this becomes a critical issue as a workout may mean you remain financially alive so the capital required to fund a workout is critical to your emergence and survival.

So what does one do when loans are generally unavailable and with an upside down situation even with good credit banks are reluctant to lend to you.

The answer hard money. Non bank lending, private lending, high points,  high interest, low loan to value ratio  but flexible terms.

Currently we are arranging a hard money loan with 10 points and 14-16% interest…Wow! Who would believe this. Not all hard money lenders are this steep but this situation is.

Why would someone do this? Simple, the nest savings will be  many hundreds of thousands of dollars, about a million, and the actual cost of the loan for the first year is about $50,000. Steep? Yes. But compared to saving his business and reducing his debt by a million, the $50,000 is a bargain. It facilitated huge gain and survival, all for a mere $50,000.

This here is a place for hard money even at its hardest. Especially when supporting a workout…

Call us if this issue is holding you back…There is an answer.

Call Norm at 413-584-2581…he will arrange a no obligation teleconference for us to discuss your options.

 

Waiting to see what happens! Are you kidding?

I hear this ‘plan’ more often then I choose to admit. ‘I am just going to wait and see what happens…’

And this is a plan? It’s an act of personal financial suicide. It’s no plan, it’s a decision to allow others to control your destiny. It’s avoidance at its best. It is self destruction.

So why do you do this I ask? Never an answer other then wanting to wait and see what happens, It is as if you are watching a tv show and want to see the ending…only his is not a tv show, it is your life.

So you never have to wait and see what will happen, here is the script, exactly what will happen if you have an SBA guaranteed loan and you are in default.

After 90 days, could be allot sooner or allot later, depends upon the bank, but 90 days is the typical benchmark, the bank will photo the collateral, arrange for their appraisal and then commence foreclosure. They will not negotiate at all, and upon foreclosure they will liquidate by auction, irrespective of how little they may get and how backwards this may seem, it is the rule of the SBA and if they fail to ‘exhaust their legal remedies’, they may lose their SBA guaranty, a very valuable payoff. You can bet they will follow through and exhaust their legal remedies. Then the SBA will pursue you through the Department of Justice to collect on your guaranty. These Assistant US Attorneys who work for the Dept. of Justice  are bad boys…and bad girls. They are very hard to get to compromise, although we handle this issue repeatedly and successfully, it is a street fight.

Now you know exactly what to expect.

Non SBA guaranteed loans, traditional secured bank loans, follow a similar path but may be easier to deal with and may offer more flexibility, but in the end the results will be the same. Some banks are tougher some are easier but they all do the same thing…foreclose and liquidate and then pursue personal guaranties.

What to do? Be pro-active, get in front of the train and stop it.

There are few  paths to take.

If SBA guaranteed, you have three options:

1.Pay, of course you can’t so this fails.

2. File bankruptcy, this fails as you lose your business, the loan stays attached to your home or you may even lose your home…not a good result.

3. Best, call us we have a plan that does work, keeping your business alive and stripping the debt of it as well as reducing the personal guaranty liability to pennies on the dollar. This works.

If a traditional  secured bank loan, you have one other option, you can enter into a workout plan that modifies your loan, this may provide some relief but the not enough to save the day.

The only real answer is debt reduction, and that is what our strategy provides with far less loss.

There it is, the entire script, with endings to choose from, You do not have to wait and see, now you know.

Call us we can help.

Call 413-584-2581 Norm will arrange a no obligation teleconference for us to discuss your issues and provide you with a plan.

 

Why do we want to fly you in to meet us and talk?

It seems quite obvious. To enhance the sales process and close a deal, one might think. More power in a personal pitch, overcomes the internet barrier, get to meet the team and learn more about the process and program. Sure, these all occur but NO, these are not the reasons why.

TRUST. Building trust is the reason.

I understand completely the magnitude of your problems and what is at stake for you. I understand completely that you are confronting total financial disaster and the only thing between it and you is us. I know you have no option, but that’s not enough.

There are no other options, alternative plans, or any other bail out opportunity that will save the day.

However, I also understand that even with this, being the case, without adequate trust in us, and our abilities and commitment to you, there are many who will not engage us to represent them; despite the alternative being financial disaster.

So my willingness and desire to invite you in and fly you here and put you up, take you out to nice dinner and talk, is for the real reason of revealing myself to you, giving you an opportunity to get to know me. We will talk about our lives, our families, our politics, our passions, our dreams, and our commitment to our mission and yes, of course, about you and your issues. We will have a great dinner, a few glasses of wine, and we will get to know each other, create a relationship, strategize your workout and create trust. The most important result coming out of your trip will be a belief that I can do what we say and that you can trust us with your most important decision… to have us represent you in this ultimate battle, to strip the debt off you and your business, debt that will otherwise destroy your financial and business life.

The objective is to help you decide that we are the right people to trust with protecting yourself and your business, fighting what appears to be an impossible mission to win, with promises of victory so good it seems hardly possible to be true.

So I provide you the opportunity to get to know me so you can trust me when I say, I will deliver.

Yes, our track record is astounding. Yes, our references are terrific. Yes our strategy is clear. But can you trust me? That is the objective.
This is the purpose of my fly me in program: to give you an opportunity to create trust, so you can then make the decision to allow me to represent you in this unprecedented battle, a battle for your economic survival.

So let me fly you in, it’s all on me and I will not disappoint you. No one has ever flown in and not become a client.  No one has ever flown in and not concluded they can trust me.

So come on out, I know a restaurant that serves up three pound lobsters, let’s do it.

 

Garnishment, whats it all about? Really.

It’s like urban legend, many different rumors, many different understandings, here is the straight scoop.

First it is different for every state. Some states even have no garnishment at all, others have high minimums of 25% of your check, others fixed amounts. Check below for information although things change so you should check your own state law if you want to verify this information.

25% Of Your Income Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Wisconsin, Wyoming.

 

Variable % Of Your Income

Illinois: 15% Gross Income
Maine: 25% of disposable income or up to 40 times the Federal Minimum Wage (whichever is lower)
Massachusetts: $125 a week
Missouri: 25% if single, or 10% if Head of Household
Nebraska: 15% if Head of Household, 25% if single, or 30 times the Federal Minimum Wage
New York: 10% Net Income
Wisconsin: 20% Net Income

0% Of Your Income

District of Colombia: Government employees exempt
Florida: Head of Household exempt
North Carolina: Garnish  for taxes, government services, and medical bills from  public hospitals.
Pennsylvania: 100 % exempt
South Carolina: 100% exempt
Texas: 100% exempt

Unfortunately all States allow  wages to be garnished for taxes, Federal student loans, child support, and alimony. Worse yet there are no garnishment limits  if you owe money to the Federal Government.

An SBA loan may be considered owed to the Federal Government, depending upon when in the process you are sued for garnishment. If it’s by the bank it is not against the Federal Government. If the bank is paid off by the SBA and it becomes a debt on your personal guaranty against the US Government, handled by the Dept. of Justice, it’s a debt against the Federal Government and has no limits.

If you owe money to more then one creditors, there can only be one garnishment at a time. So whoever wins first and gets a garnishment order wins, the others have to wait .

It is a legal process and thus there are many opportunities to negotiate a settlement. It will not come as a surprise, you will know when it is happening and can respond in advance of the court proceeding.

It is an opportunity to settle.

 

When does the collateral become the propery of the bank?

There is one obvious answer, after foreclosure. Until that moment the borrower has title and the bank cannot sell or liquidate anything, the borrower is in total control. Almost true, but not quite.

The moment in time that the owner gives up, decides to shut is doors, close down, the liquidation of collateral becomes he property of the bank.

In other words, the cash from the collection of your accounts receivable, as received, belongs to the bank. The cash from the sale of  your inventory, when liquidated, becomes the property of the bank, in fact once you decide to close the doors and cease normal operations, the proceeds from a liquidation effort or cash received from the collection of receivables, or the sale of inventory,  becomes the property of the bank. Title may not have passed but once liquidated, the proceeds from liquidating the collateral do become the property of the bank.

This is a very important aspect of our strategy as any attempt to liquidate  collateral to create cash for the borrower must be carefully designed and implemented or you may be violating the banks collateral rights.

Once you have decided to cease normal operations you are then charged with liquidating for the benefit of the bank.

Be careful this is a trap for the unwary and can cause problems if this principle is not respected. You must design your sale of assets or collection of receivables or liquidation of inventory carefully to avoid this being construed as a going out of business sale thus a liquidation for the benefit of the bank, not the owner.

 

Its official, there will be no Black Friday or Christmas bonanza.

The statistics are in, the large retail chains are reducing inventories by as much as 20% from their typical high level during the Christmas quarter. Of course this automatically means they will sell approximately 10-15% less then last year, as they have predetermined what they can  possibly sell based on their available inventory.

This could mean a bonanza for the small store who inventoried a little more, has higher prices and broader selection and will attract some additional Christmas shopping when the major stores run out of inventory before the season is ends.

Plan accordingly.

It also appears that Black Friday will no longer be the event it has been in the past as large chains are beginning Friday sales a month in advance, announcing through mailers, email, ads,  that they are having Black Friday sales every Friday for the entire month of November. Problem is, it will take the urge out of the consumer to attack on Black Friday and experience the best  one time sales. It built a furor of sales. Now with their attempt to start earlier and sell more with four Black Fridays, I bet the gross revenue will be lower and the net profit  will also be lower.

In fact the best guess is that there will be a significant number of last minute shoppers taking advantage of last minute sales, the lowest pricing of all.

In short this will be a tough Fourth quarter and will require clear strategizing and impeccable implementation. Figure out what your plan will be and execute with precision, carefully.

 

I object to the use of a BPO (Brokers Price Opinion). Do not fall into this trap!

In negotiating a workout, in many situations, the conclusion is an amount based primarily on your ‘liquidated net worth’. What else could it be? It is the only reasonable measure of what the result would be in a real defaulted bank loan, foreclosure and liquidation by auction, the only kind of liquidation the bank will utilize.

So if liquidated value under auction is the bench mark, what happens when a bank orders up a BPO (Brokers Price Opinion)? They are obtaining he highest possible value without being controlled by regulated standards such as those controlling a licensed appraiser.

A BPO is the opinion of a real estate broker, licensed to sell real estate, not appraise it. Presumed market value, what it would sell for on the market in the due course of time, a year or more , whatever absorption is in this market would be, hardly a likely result if foreclosed and auctioned. But by using a BPO the bank pushes up the borrowers amount of equity and the liquidated net worth is valued with the inflated BPO and the bank has improved its bargaining position. The greater the equity, the higher the liquidated net worth and the more it will cost to settle, negotiate a workout.

Do not allow BPO’s to be used, use only certified appraisers, the truth works….opinions do not.

There could be no higher an appraisal as a BPO. It is unreliable, does not on form to any standards and should never be considered a valid determination of value, especially in a liquidated manner.

A recent example: Just heard from the bank doing a BPO , came in at $500,000. Our appraiser  re-certified an earlier appraisal done  months ago for $525,000 and came back saying $375,000   Clearly the BPO was exactly that an opinion.

Do not let this happen to you, offer to pay for a real appraisal, it will serve you much  better and is worth every penny it costs.

 

 

Clear Communications. Is it too much to expect?

Clear communications, is it asking for too Much?   Apparently so.

I did not hear that…

I thought you meant something else…

I forgot…

I told you I couldn’t…

The manager said to do….

The client said….

I could not finish on time so I ….

You never told me that so I …

And on it goes…costly time consuming, client destroying, profit eroding errors, because we do not communicate carefully, clearly, specifically, adequately.

I am not going to teach you how to communicate successfully, we all know how, we just do not do it. However I will point out to you some frequently missing components, ways to prevent bad communications and support clearer communications.

Why not:

1. Ask If the directions were fully understood.
2. Ask the listener to repeat them to make certain the communication was received as intended.
3. Do it in writing, what a novel thought, takes time but prevents failure in the long run.
4. Have systems in place, in writing, that assure successful repetition.
5. Create  interim inspections of the process to assure accuracy. ( isn’t that a managers job?)
6. Train, train, train, do not reinvent the wheel for every situation.
7. Develop key indicators, and quality control benchmarks to support success and to make reporting more effective. It does not have to be an investigation every time someone gets confused.
8. Organize teams so no one has to do it alone, each team member can help each other…team success, is more valuable then individual success.
9. Incentive based rewards for successful performance works.

It can be done. Effective communications can be a hallmark of your business which will result in greater success and a more profitable business model. It is basic but if we are not succeeding in communicating successfully, how can we possibly succeed as a business.

 

Is it true that some properties cannot be appraised?

It seems an impossible concept, properties that cannot be appraised. How can that be? Certainly every property has some value, so how can it be that a property cannot be appraised by a licensed trained appraiser?

In fact it is not an issue of value. Certainly many properties that cannot be appraised are very valuable indeed and would sell for a very substantial price, but cannot be appraised. Of course if a property cannot be appraised, the buyer cannot get financing as financing is controlled by appraised value, no appraisal…no value…no financing…no sale or purchase possible.

So I ask again, how could it be that a trained certified appraiser cannot appraise a property that has clear value?

It’s because of the lack of comparatives.

Appraisals are driven by the sale of comparative properties in the same market. If there are no comparative sales then an appraisal cannot be done, no comps no appraisal.  No appraisal no financing, no financing no sale.

So in reality an appraisal has almost nothing to do with valuing the target property, it has only to do with what other similar properties in the same area have sold for…that’s it, that’s all there is, and if no similar properties have sold in the immediate area there will be no appraisal and the property has for all practical purposes for financing reasons, no value, as it cannot be appraised as the system requires.

This makes absolutely no sense at all. But this is the way the system works.

I have had properties in an area were no sales activity has occurred and have not been able to have a property appraised and thus it could not be financed or sold, even though a waiting buyer wanted to purchase.

I have had unusual properties in the middle of robust markets but because of the lack of comps for particular unique properties…no appraisal available.

It is an unusual problem…but it occurs more often then you may think…If you are confronted by his issue, call, we always have a solution.

 

It is time to fire some of your clients!

We talk about the need to downsize to accommodate reduced revenues and increased overhead, and frequently we  focused on reducing payroll,  negotiating a discount on rent, and reducing other controllable overhead items, all good ideas, actually necessary strategies in today’s changing economy.

However we seldom talk about the need to reduce our client base, sounds crazy. Why would we ever want to do that, especially when confronting reduced revenues?

If anything we want to increase the number of clients we have, not reduce the number.

Is a simple concept most often overlooked but a very necessary evaluation and  an effective internal adjustment that will yield great results.

Over time, in our effort to build sales revenues, one frequently ignores the profit earned from each sale and from each customer, focusing more on gross revenue, believing the higher the better.

In our drive to build gross revenues we forget net profit is far more important.

Thus we sometimes sell at the lowest price to small volume clients or we give away shipping charges, or we sell to clients who pay in 120 days, bounce checks and always owe you as they order every 90 days. Sometimes we have sales and extend the sale price indefinitely, sometimes we have sales and only manage to sell the same amount to the same clients but at lower prices achieving no gain,  and on it goes. There are many ways we erode our profit, yet our cost of goods and overhead remains the same.

This reduces our net profit  which is damaging to our well being and we do it to ourselves.

So here is the fix. Review your clients one at a  time and evaluate whether or not  each one is worth keeping as a client. When you discover prices too low, or net profit being eroded for any reason, call the client explain you must adjust appropriately as they will no longer be shipped at the previous terms and conditions. If they reject the changes good let them go, If they stay with new terms and conditions even better.

You are unlikely to make more profit selling more goods or services at low margins, too low to yield adequate net profit. It does not work. In fact you will find out that most of your profit comes from a small percentage of your clients and if these were the only ones you had, you could downsize and increase profitability simultaneously.

Review your client base and the sales you are making  to each one, see what it looks like and then make the appropriate decisions one at a time.  You may be able to increase profit and reduce payroll This is quality downsizing.

Do it, it works.

 

Do not hide out. The importance of effective communication and follow through wth your banker.

I was talking to a banker yesterday representing a sizable bank with a dedicated workout department, Special Assets they call it, and she commented about a particular borrower whom they were reluctant to give us a workout opportunity, let alone a resolution. I went to speak with her personally as her position was quite resistant and thus unworkable, something I had to overcome.

After talking, she explained that this borrower refused to talk with us, would not answer his calls, would not provide appropriate paperwork, financial reports or even an explanation of his intent. The file had been passed around the room to many different workout officers and no one could reach him or gain any level of participation and cooperation. They had offered workout opportunities and wanted to help him resolve his issues and default with them, but to no avail.

Thus they commenced foreclosure. Upon the borrowers receipt of foreclosure notice, he then reached out and called the bank. Understandably, from their perspective, although unrealistic and quite emotional, they now would not speak with him and referred him to their council who simply explained he was being foreclosed upon.

At this point he sought out professional help, us and I got involved.

I was getting long with the banker and she further explained that if the borrower refuses to cooperate, when they then enter the legal process they too will now refuse to cooperate, when he finally surfaces, which he inevidably will. She explained that the workout deal they would have done before, which was very reasonable, is off the table, not available because of his failure to cooperate when given an opportunity. Their intent was to now grind him down and take what they can get, even greater losses.

Apparently their deal that was reasonable before was no longer acceptable to them now because they were emotionally upset and wanted to punish the borrower even at their own loss. Sounds silly yes but very true. Bankers are also emotional beings as so many business people are. Emotion or ego clouds the decision making process and supports bad decisions, not good ones.

They preferred to now punish the borrower rather then finally settling. Not unusual, I spend much time calming the anger of disgruntled lenders and workout officers, and they all say the same thing, they are angered by the avoidance and lack of cooperation and participation thus they withdraw their reasonableness and prefer to simply make them pay, despite their inability, so they foreclose and liquidate spending more and getting less, all in the name of justification because the borrower ignored them.

Silly? Yes! True? Yes!

More fortunately I am able to deal with this as I spend the time to create trust and respect between myself and the banker, creating a working relationship and restoring the lost trust the borrower destroyed.

The net result was and always is that while the banker remains angry with the borrower, the banker is NOT angry with me and I therefore can manage to move them back into a negotiating stance as I, the third party expert, am reasonable, trustworthy, respectful,  cooperative and committed to the banks success, and my clients debt workout and resolution.

It works well and supports two conclusions.

1. Communicate effectively and respectfully,  and timely, failure to accomplish this simple task is fatal.

2. No matter what, the banker usually has some ire with the defaulting borrower as in their eyes the borrower breached his/her word. We, as third parties, can  gain much more traction and respect then the borrower can and thus we are more successful in gaining the results we need.

All to frequently we hear borrowers in default exclaim “…but I offered them that long ago and they refused and now they accept  it from you? We even achieve deeper discounts, how does that happen?”

Simple, We have credibility, and treat tem respectfully and effecively, the defaulting borrower does not.

The lesson, respond intelligently and effectively, do not hide,  or fail to cooperate. Hire professionals to represent you, we will do a better job and achieve better results.

It works, do it.

 

The Department of Justice, better called the Department of non-justice.

Yes, on we go to the Department of Justice. US Attorneys, here we come.

Many of you in default  of SBA guaranteed loans or disaster loans will eventually be forced to deal with the Department of Justice, the collection arm of government agencies.

It is not urban legend. It is the truth. In the end, when nothing worked, the IRS and the SBA resort to the Department of Justice and its Attorneys to implement collection procedures for collecting debts owed to the US government. Now there is a problem for certain as they have an unlimited budget and you do not.

No, it is not time to flee the country. You will not be arrested and prosecuted as Al Capone was; you are not a criminal and will avoid prosecution. There may be a trial, a civil trial, but that too is highly doubtful, as these matters do get settled.

Unfortunately, if not settled early, and for sums that will probably be considered unaffordable, unrealistic, unreasonable, the procedures get rather dicey. The US Attorneys are tough, unyielding, arrogant, and obnoxious at times, unreasonably demanding, sometimes even silly in their conclusion and demands and unfortunately unwilling to bend…at all, so they want you to believe. It is a difficult path but one we win at.

Currently we are representing three borrowers whom have negative net worth, are ‘upside down’, have limited revenues , some income property real estate, all of which yield a negative net worth, and are frankly unable to pay their bills, let alone their debts. They have been subject to a few years of bickering and posturing with the US Attorney, and there is a pre-trial settlement conference being attempted this Friday, to which I am attending to attempt to negotiate a settlement before a trial date is set.

Following Federal law, the two sides have submitted  required settlement offers. Our side submitted a collective combined offer of $120,000 all borrowed money from friends and families. Reasonable, respectable and well beyond their collective net worth, the men owe over $1 million.

Here is where it gets strange, silly, actually as it is a preposterous position that is indefensible and frankly, in my eyes, a break from all reality, not to be taken seriously and a mockery of the justice system. Despite complete disclosure of all financial records, indicating a negative net worth and insufficient  income to service basic living expenses, the US Attorney insists that each borrower is capable of paying back over 1 million dollars each!  Thus their settlement offer was full payment!

 

Ye gads! I do not understand this at all. Is the justice system really being served in any meaningful way with a demand of one million dollars to satisfy the offer to settle component required by the court system despite a total and complete inability to repay even one penny without resorting to funds borrowed from friends and family which are unlikely to ever be repaid? Is this serving the purpose intended by the court system to promote resolution?

Is this what our Justice Department believes is appropriate and effective strategies and collection practices?  I understand bargaining, and I get the need for the Justice department to collect as much as they can, but I do not understand how in the face of reasonable people presumably acting in good faith and committed to upholding the system, that ridiculous, preposterous, demands are made by The Department of Justice that defy any pretense of reality. What has possibly been achieved here and why would people with sworn oaths to uphold the Constitution of our country resort to bold faced indefensible, unsupportable, bullshit?

I am more than amazed; I am disgusted, revolted and ashamed of the system we must submit ourselves to, controlling our destiny. It feels as though we are in a third world system where justice is bought and sold as a commodity and someone is looking for a payoff as why else would their position be so completely void of any logic or legitimate foundation.

I will be attending this hearing on behalf of my client. I will do my best to resolve this and bring back justice to the Justice Department and my clients. I will report back my success.

Do they shoot the messenger?

 

The single most self destructive force in an entrepreneurs life.

Do not let ego control your business decisions…it does not work.

Small business owners generally have a common disease….an over controlling ego.

It is understandable in part, the ego part, as an entrepreneur must have a strong ego to stand out in front of the crowds and  take the risk of opening up a business. This requires a very strong self image and an abundance of ego. However an ego out of control is a dangerous thing, as it will drive you to make the wrong decisions thinking you are 100% correct, irrespective of what logic would dictate and what the numbers clearly show. To strong  or controlling ego makes you believe you are invincible and take you down a collision course.

No one wants to hear this, because no one whose ego is engaged believes this. ‘Not me,’ they say…emotionally. ( emotion lives in ones ego). But they are losing money month after month and refuse to make the hard decisions, such as reduce payroll, “can’t fire anyone.” they say, “I need them.”

Best yet is the inevitable issue, the stone cold realization that the business cannot survive based on current revenues and dumping any more money in is folly, if there is any more to dump in. So one should clearly shut it down, but noooooo, they prefer to work it till the doors are shut by some other force to everyone’s extreme detriment, much wasted capital and time and the elimination of better options. But ego controls and onward they go right over the cliff, without a parachute or a plan.

I have spoken to many business owners who want us to remove their debt, a task we can accomplish and give them their second chance, our mission, and yet when I ask them if the removal of their debt will turn them right side up…and they ponder and say “ well no, but it is still what I want to do as I believe I may be able to make it work without the debt” wishful thinking  even though he is not paying his debt service now and is deeply under water unable to survive, operating below break even.

What’s the point? I ask…pure ego driven emotional commitment…that will not work out.

Many businesses will not, cannot and should not survive this recession.  The point is we need not go down with the ship.  There are far better more productive, safer, options including shutting the doors, on your terms.

Needlessly and foolishly walking off he cliffs edge without a parachute or a plan is irresponsible and very wasteful. Maybe even dangerous to ones family and self. Yet many recklessly walk this ego controlled path, refusing to accept or admit that this business must be closed.

It makes no sense. If you are losing money, month after month, take a walk and talk to yourself, ask yourself what you would advise a close friend in this situation and then take your own advise…close it down with a re-emergence or survival plan in hand.

It is the right thing to do. Prepare for another day.

 

Does The SBA collect equally amongst partners?

A frequently misunderstood concept which results in rejections of what might have been a reasonable and acceptable offer if done correctly.

The reality is simply this:

Every partner except husband and wives, are reviewed individually and must provide an offer in compromise based on his/her individual financial condition. Thus one partner may pay more than another in an offer in compromise. This is a frequent result. Filing a joint offer will result in a rejection. Filing the same offer will also result in a rejection unless the financial conditions are the same.

Thus each partner must stand on his own financial condition and make the best offer possible to succeed.

Husbands and wives must file a combined offer unless here are unusual circumstances requiring separate filings.

There is much more to filing an acceptable offer then one may consider without deep experience. I highly recommend you acquire some expert assistance from someone who has filed dozens of offers with successful outcomes. Do not experiment on yourself, you will learn what does not work. What you want is what does work.

Call us for help, Call Norm at 413-584-2581 he will arrange a no obligation tele-conference to discuss your situation and offer you some advice.

 

Do not water down your mission. Specializing works.

If Ray Krock, the founder of McDonalds, had expanded his fast food concept to serve pie, and meatloaf, fish sandwiches, soup, etc etc,  he would have been a diner, serving a broad based menu, instead of specializing in just hamburgers and fries…he would never have opened his second location let alone his ten thousandth.

If Monro Mufflers decided to do brakes, tuneups, tires, general repairs,  windshields, etc, they would be a common every day service station, and could not have sold thousands of franchises.

If a steak house sold a full menu of everything, they would probably not be known as a steak house.

You get the point, but so any business owners miss this mark. Especially in this downturn, where competition is fierce and consumers are looking for the best deal and the best resources, specializing is the way to go.

Not wanting to lose business many business owners tend to expand their offerings to whatever the next person who walks in wants. Their thinking is they do not want to lose the opportunity to make money and do business, so give the customer whatever he wants.

What he is missing out on is far more valuable then the extra momentary business.

First, there is the value of specializing, it includes an economy of scale, if you just focus on one major item, you get very good at it, you limit the inventory and supply requirements, you have expertise, an identity, you can market with pinpointed focus you can buy better. You get very good at something, better than everyone else, and you become known for this expertise. You can charge less than other because of your efficiency and can therefore own your market share, or charge more than others because of your expertise and still own the market place.

Wow ! All that by just limiting the desire to be everything for everybody?  Yes just that.

It’s called your mission, and it should be focused, defined, specific and adhered too.

If you  sell tires, do it, exclusively, significantly, better than everyone else, and a better price point. It is a simple message, a simple direction and it works far better than generalizing.

There are specialties in law, medicine, almost every trade has its generalized practitioners and its specialists.

The specialists do better.

Be one, it works. review your position in the market and since you cannot really be good at providing everything for everybody, figure out what you do best and fill that niche better than anyone else in your market. That works.

 

Check it out: In the trenches at Second Wind, what happens in the back room, where the workouts happen.

Yes friends, we are about to be a bit more transparent. We are opening the door to our back room men, the men who form the teams to fight the debt that threatens to bury you and your businesses. These are the men who are on the front lines.

What they do, how they do it, what they see, hear and do.  What we learn about you and ourselves. Interesting? Absolutely. Revealing? I believe so.

Check it out: WWW.Secondwindtrenches.com

 

Let me remind you again, employee productivity is critical, especially in our downturned economy

The times have changed. Revenues are down and expenses are up. Margins are thin as pricing is being forced into a downward spiral from brutal competition. Customers want value and are willing to shop to get it. Business owners need the revenue so deflation is the rule.

Business owners are reluctant to downsize by reducing the number of employees. Loyalty and waiting for the return of the demand are the excuses.

The answer is cut deeper then you think you need, eliminate as much of your workforce as you dare and then take more out. Old habits are hard to change and since productivity is usually in the area of 30-40%, you could maintain the same production with probably 1/3 fewer workers, if you could increase productivity while decreasing workforce. Since sales are down, cut to 50% and then rebuild with a new younger lower cost workforce willing to learn and work hard at far more then 30-40% productivity currently experienced.

There is a huge unemployed potential workforce available to rebuild with, and you can train them to be as productive as you want and now need.

The challenge is changing older workers work habits, getting them to increase productivity without developing animosity, very difficult to accomplish, and with a waiting available trainable new lower cost workforce available, the opportunity for a clean sweep and an upgrade is absolutely possible. Alternatively take the time and effort to reprogram a smaller current workforce, as they will be somewhat receptive as they see half their peers be dismissed. Cruel, heartless, you can’t do it? If you do not, you too will be out of work looking for a job, and we all know how that will work out.

Payroll is usually the largest expense line item, and it comes every week. Taxes and benefits are additionally huge. Reducing employee base is the quickest and most effective way to deal with the downturn. Increasing productivity is a crucial objective of downsizing, without it the downsize will fail.

Incentives, teams, reviews, training, cross training, appreciation programs, goals and objectives, better organization, all play an important role in increasing productivity and therefore increasing profitability.

Do it, you have no choice.

 

Mortgage modifications do not work.

The issue is complicated, people wan to hold on to their homes. They want to pay their mortgage debt. They need to restructure their loans so they can afford to pay. They are attracted to a mortgage modification, and believe this will save the day. Unfortunately, the statistic are quickly revealing, a huge percentage of mortgage modifications  are defaulted on a few payments into the new program, enough to cause one to wonder why all the rush to modify, this plan does not really work.

Statistics are quickly emerging that upwards of 40% of mortgage modifications are defaulting within the first year. What is wrong here, why is this happening and what does it mean?

1. The bottom line speaks loud and clear, many cannot afford any mortgage payment at all, they have probably lost their job and are merely buying time, hoping that by the time the mortgage modification occurs, they will find a new job…a plan that has failed many many times, unfortunately. Unemployment is a killer of modifications, and until this issue is resolved, mortgage modifications will not work.

2. The second largest problem is the walk away. Even after the mortgage is modified, the borrower realizes the value of the mortgage  far exceeds the value of the house and thus there is no good reason to continue paying on this investment as there will be no return to the owner…ever.

The fact remains, in either situation, the debt is too large to carry and no form of modification will change this reality, so what is the point of it all.

The only resolution is a reduction of debt. Unfortunately this occurs only with a short sale which requires you to lose your home. he banks have yet to embrace a short refinance, in which the borrower pays off the current bank with a reduced amount through a  short refinancing  through another lender and thus stays in the house. A great idea but its time has not yet come.

It’s a matter of dealing with the problem not the symptoms. The problem is too much debt, not the terms and conditions. Yes reduced interest and longer amortization may reduce the monthly payment but this is not the cure for the problem. Debt forgiveness is the only solution.

 

Why do banks cancel foreclosure liquidation auctions?

It is happening more and more every day. In some areas of the country it is the rule not the exception. This trend will get larger and larger, creating a real dilemma for everyone involved, as it is unclear what happens next and what to do about this situation. It is like the groom not showing up at the wedding. Or maybe better described as the executioner not showing up at the hanging.

Here is the deal. On the one hand the banks need to foreclose on defaulting loans, that’s the rule. Once defaulted and noticed and the process closely adhered to, the home eventually is scheduled for liquidation by auction.  At this event, it is hoped that someone will bid in adequately and the bank will sell or liquidate the property converting the collateral, the house, to cash for the bank. Ownership changes hands and the previous owner is out the door, on the street, without ownership of their home. New owner steps in and the bank while taking a loss receives some consideration as a payoff. That’s the plan.

Now what is happening is, the bank goes through the process, perfects their position, notices the owner and the community, advertises and at the day of foreclosure auction, they withdraw the event and stop everything. Who owns the house then? Still the original owner, as he has been brought to the edge but not pushed over.

Why would a bank do this? Difficult to know exactly what they are thinking but there are some obvious reasons we can see.

First, the bank has determined that the likelihood of a bonafide adequately high bid is all but zero. If the auction occurs and no one bids  the bank ends up owning the property they must now insure it, pay for the utilities to protect it, be responsible for maintenance and repair,  pay the taxes, market it indefinitely until a buyer is eventually found. This is extremely expensive, time consuming and not the business the bank wants to be in.

Thus they are more and more frequently bringing the foreclosure process to the brink of completion and then walking away, at the auction date, not completing the process,  having determined that no one will show up to bid . The bank does not want to own the home, thus they allow the status quo to remain, the owners in the house, ownership not having been changed, and no payments expected or made for an indefinite time period while everyone waits for something to happen.

Should the economy improve, the bank can always fulfill its mission and auction the house. Until then the family lives free in a house that for all practical purposes is owned by no one. This leaves the family to care for the house, and maintain its viability as the bank waits for the economy to mend itself, which it believes will surely occur…sometime.

What should the owner do? A hard call, some stay on living, without cost, trying to repair their own financial condition, get a new job and either rework their debt obligation with the bank or  walk away looking for other living opportunities, now that they have repaired their own financial situation.

It is new ground, never experienced before, thus there are no history to follow and learn from. The fact is, this is what is happening all across America.  In Detroit, entire neighborhoods are being abandoned by the banks, and the home owners are abandoning their homes leaving blocks of unwanted, not lived in, properties that neither the bank nor the borrower want or continue to live in or maintain. Ownership, and its responsibilities appears to be the hot potato that no one wants to get stuck with.

Unusual times, unusual problems, unusual actions, on every one’s part.

Be aware, pay attention and make decisions with this issue in mind, it may apply to you.

 

Beware of asset protection strategies, if you are in default on a loan, there are better ways of protecting yourself.

Some small business owners, understanding their vulnerability to personal loss from the normal risks of business, or more recently from potentially destructive forces of our down turned economy, turn to their lawyers for ‘iron clad’  asset protection, protecting cash, property, real estate, stock, whatever may be valuable.

Problem: your assets may be protected from creditors attack, but if one is interested in doing a workout on a secured loan, asset protection techniques may not work as well as you may think.

Here is why.

Asset protection may successfully put a barrier between your creditors and your assets, so the assets may not be reached, foreclosed on, liquidated. However, if you have significant debt that may be in default, you will have a far more difficult time, negotiating a debt forgiveness workout.

It’s like asking the jury to disregard the last remark, they heard it, it has impact, it cannot be pretended it did not happen. If your attorney successfully locks up and protects great value in identifiable assets, its like telling the Bank, SBA or whomever, that it’s here but you cannot get at it, so disregard it when considering my offer in compromise application. They won’t.

It will not happen, so yes your assets are protected but also you will not experience the benefits of a valuable debt forgiveness through a workout negotiation.

So one objective was satisfied, asset protection, but another one was not satisfied, debt forgiveness through an offer in compromise.

The result, you either unlock your asset protection and use it to pay down the note, or live under the cloud of a lien forever. That didn’t work out as planned, but your lawyer promised you protection, which he gave you, but he did not understand that this protection would be your undoing when you default on a loan and want to do a workout.

There are far better ways of  protecting your assets, by presenting your financial picture in the light most favorable to your end goal, protection of your assets, so when you are in  default on a loan, you can successfully negotiate a workout while protecting your assets, without a traditional legal, iron clad asset protection plan in place.

It requires a case by case analysis and a different type of asset protection, one which is far more subtle and somewhat transparent, but allows you to enter into a debt forgiveness plan with your bank with great success and little loss.

What is this technique? Depends on each individuals circumstances, there are no generalizations, but  the process works, its more of a recasting and adjusting your financial picture without fraudulent transfers and without using trusts and limited partnerships, it’s the smart way to do asset protection and debt reduction together. This is what you want, this works. A bullet proof asset protection plan is asking for a fight, one that you will lose.

Call us for help, 413-584-2581. Norm will arrange a no-obligation tele-conference.

 

When discussing a debt workout offer and compromise, never use a range of numbers.

It is a very common presentation, it goes like this, I will pay you  $3-5,000. So let’s see, which number do you think the creditor may accept? Obviously the $5000. Which number do you think the man offering the compromise wants to pay? Clearly the $3000. So why do we create this obvious disconnect? Wanting to soften the blow by appearing to offer more. Wanting it to not look as bad or as low as it needs to be.

Personal weakness, wanting to suggest more but pay less, it never ever works. But business owners very frequently apply this strategy, with obvious and clear failure in store.

So here is the very simple rule. Never do this. Stop, consider what the number should be and offer it. Do not offer a range, it is silly, it does not work and it costs you money. Then negotiate if you must, but from the point you provide. Do not do your vendors job for him. Do not give away what you do not want to pay.

It is another example of wanting the other person to feel better and like you more, by weakly suggesting you will pay more then you want or can with a hope he will settle on the lower end of your range but letting him know you can pay at the higher end…Really, when has this ever worked out? Do not give it away unintentionally.

 

You are in default and you own a valuable minority position in real estate.

Ooops! You have a business and have a defaulted loan. You provide a balance sheet and financial statement that discloses a partnership relationship on a valuable piece of real estate. You believe your ownership position is in jeopardy, what do you do?

There are a number of issues here as follows:

1. You do not want to lose your property interest.

2. You do not want the equity added into the workout resolution, it will drive the offer in compromise offer up significantly.

3. You do not want the bank to demand you transfer your ownership interest to them as your partners would hardly want to have the bank as their new partner.

4.  You do not want to sell your position back to your existing partners as the cash would go to the bank and you will lose out on everything the investment was intended to provide you.

What can you do?

Here is the answer.

It actually is good advice for any partnership, so here it is, a poison pill agreement. An agreement that if any partner in a partnership relationship were there are valuable assets such as real estate, the partners agree that if any of the partners come under creditor attack, file for bankruptcy or assignment for the benefit of creditors, become insolvent, etc.the other partners have the option of gaining control of the offending partners ownership with the consideration being a hold harmless and indemnification agreement agreeing to take over that partners debt obligations on the property in question.

Thus when the bank attacks, or a partner becomes insolvent, the letter agreement will deflect a banks or creditors action. As soon as the bank begins to reach in the other partners can take control of your position and reject the banks demands. This works, is done in big business and will work here.

Call if you need help designing this agreement.Norm will set up a no obligation tele-consulting call. 413-549-0162.

 

They charged me for the chips and salsa. Penny wise and pound foolish

We must be careful in how we respond to the current decline in business revenue. I see and experience a    number of knee jerk reactions. Some not so smart. Recently I was visiting a frequently visited restaurant and when expecting the usual treatment at the bar, specifically some chips and salsa while we have a drink and wait for a table, but this time the bartender explained it would cost me $2.95  for a basket of chips and salsa.

I did not order it, was very unhappy and while the food was as expected, and I was satisfied with the experience, I was very unhappy about the chips. In fact  I have been annoyed for a day now and promised myself I would not return, soon. They nickel dimed me right out the door. How silly.

Here is what they did, they took a free, make me welcome and invite me to spend money strategy by providing the bar customers with chips and salsa  while we wait for our table and now are requiring me to pay for it, is offensive. Taking what was a gift, an offer of hospitality and turning it into a profit center was a bad move. Had they raised the price pf the meal or the drinks that would have been acceptable and would earn no comment at all, that’s a fact of life and business. But converting hospitality to a paid concept is a breach of our deal, what I expected and was now refused and this was unacceptable.

Here is the point. We all recognize the need for controlling our costs, and assuring profitable operations, but we must also use our heads when we decide what to cut and where to increase. Not providing signature items that attract customers is not a place to save. In fact expanding this area may be a better consideration as it creates a competitive advantage. Remembering tha the objective is to bring customers in so they can spend large dollars, not to nit pick them to death with charges that are unexpected and unwarranted so they now do not want to return…What was gained? What was lost?

Perceived value includes all the benefits one gets when shopping at a particular location no matter what the venue may be. The little small additions that express the desire to do business and respect for the customer is  not the place to save money, as that may be were an enormous amount of good will is created or lost over a few pennies.

So yes watch your expenditures but lets not let the tail wag the dog.

 

The Red Sox and Patriots lost this Sunday, Why? Its not what you think and it applies to your business.

I have been listening to the chatter for two days now, how Pappelbom blew it giving up 4 runs in  three outs. How Brady fumbled in the last two minutes giving up the ball and the win…but it isn’t so, these may have been the last mistakes made in either game, but the reason the Red Sox and the Patriots lost was because the team failed not because these individual players failed. Not so.

In the Red Sox series against the Angels including the last game, Big Pappi went 1-10. The team batted atrociously and no team can win without any hitting and scoring. The team lost because each player did not perform his job well, not because one player failed at one moment.

In the Patriots game, there was an obvious opportunity for a missed field goal, a toss to Moss in the end zone when he was uncovered but the toss was high. If you look close, there were many blown plays, missed blocks, missed patterns run, the Pats looked like a team not ready to play that day so of course they got beaten, they were outplayed.

So is it the one play that was visible? Was it one player who failed to perform as expected….certainly these issues supported defeat but the question remains was it their fault?

A resounding NO.

Of course it is a team responsibility, even the coaches were responsible for not having their teams ready in peak form, capable of delivering their best, as had either team done this, the Red Sox or the Patriots, they would have been victorious.

How does this apply to your business?…Simple, it’s not just about the star salesperson bringing in the large order, or the boss making the right decision at a critical moment, it is about the entire team pulling in the same direction at the same time and if each team member does his best the team will win, gain ground, improve profit, and everyone will reap the benefits.

Let’s stop looking for scapegoats as easy as that may be, as owners let’s stop looking for the easy win, depending upon our best hitter to hit the home run. Let’s  recognize that it is always a team effort and victory is always a function of each player doing his job as best as he can, and thus the win occurs.Under such circumstances,  great players can and will do more, better decisions are made and yes under these circumstances we will see some home runs… Good team work supports outstanding individual performances… Outstanding individual performances without a solid eam effort is not as successful. We are only as strong as our weakest link, how many times have we heard this…it remains true. Teams win. Winning teams win more….figure it out.

Its team success that we look for, not individual stats.

 

Shortfall liability on a short sale.

A frequently asked question is what happens to the unpaid debt in a short sale? Is the borrower still liable for what is not paid off in a short sale? Can the bank still come after the guarantors, or the primary borrowers in a short sale situation? Yes, No, Maybe!

Here is the reality, it is clear that there would be no short sale if the bank  did not release the remaining debt owed and not paid off by the short sale, what would be the point? It is clear however that the bank could follow the borrowers and guarantors if they chose, as a short sale may be allowed to sell or refi the property and reduce the debt but the bank could continue to pursue the borrower if they chose. Probably pointless at that time but possible.

I could imagine a borrower wanting to sell a property for less then the debt because it was worth less but if the borrower still had assets and net worth the bank could allow the sale but still demand additional payment or payoff from the borrower. This has happened and we do see this result. However the savvy borrower in such a situation would make it clear to the bank that the short sale is contingent upon the bank releasing the borrower from any shortfall liability or costs of collection. If made clear and appropriate paperwork stating this was agreed to and committed to by the bank then the short fall liability truly disappears.

I would not automatically assume this result prevails without a clear understanding and written statement supporting this contingency, in fact I would make it part of the buyers offer to purchase, that the bank releases the seller from all short fall liability, which will then make it part of the deal and force the bank to accept it or counter.

In most cases even if not discussed or added to the paperwork, the same result will be reached, but why leave it to guesswork, why allow this important detail to be left incomplete? In addition there is the issue of the conversion of forgiven debt to ordinary income for IRS purposes, which will occur  unless a 1099-C is added to your tax filing which requires the forgiveness of debt to be dealt with, thus it is an important issue for many reasons and must be included in any short sale.

Get a statement in writing forgiving the short fall and then file the 1099c to make certain it is not counted as ordinary income. Check with your accountant for the qualifying requirements for this. (See other blog post in this blog which discusses this issue).

 

Yes you can do a short sale even with SBA or IRS liens on your home

I hear it from small business owners all the time, a belief that they cannot implement a short sale on any of their assets including their home, if appropriate, because they understand the IRS or the SBA has a subordinate lien on their home, or in the case of the SBA even a subordinate mortgage.  They make no effort to enter into a beneficial short sale or short refi when it would be a terrific resolution, believing they cannot accomplish this goal because of the liens or mortgages.

Not so! It can be done, a short sale or even a short refi can be accomplished in either case with the following principles in play…

By demonstrating you are selling for current liquidation value, and that the owner is to receive no distributions and that no distributions are permitted to anyone other then the priority lien holders in the order of filing, with nothing going to the borrower or any subordinate debt, then the SBA and the IRS will release the property to be sold short under such circumstances.

For the specifics of what documentation is required to achieve this result see the IRS Certificate of Discharge of property from IRS liens,IRS bulletin #783 for a full description of the requirements for such a transfer when an IRS lien is on the property. Similar requirements for the SBA.

It can be done, it is challenging and difficult but if you persist a short sale or even a short refi can be accomplished and the IRS or SBA will either release the property all together or subordinate to new financing depending on whether or not you are selling short or refinancing short…either one can be accomplished as described.

Get help f you need, there are plenty of experts who know how to navigate these tricky waters, or call us 413-584-2581 Norm will arrange a no obligation tele-conference.

 

What and why do Banks bid at auctions for your assets and the effect on the borrower and guarantors.

Always an question, what will the bank bid at the foreclosure auction? Sometimes it’s the full amount of the debt other times it’s nothing and other times it is a small amount above the highest bid. It is an important question as it affects the residual debt of the borrower and strategy associated with resolving these issues.

First lets separate the foreclosure on real estate and that on business equipment. Regarding real estate, we most frequently see the banks bidding in their mortgage amount, even if there are no bidders. A simple reason, when they then re-sell the property they experience the least amount of  taxable gain, as their taking the property in at the mortgage  amount increases their basis to that amount.

With non real estate assets, hey will either willingly allow someone to bid up to an acceptable number or if no bidders at all, they will  bid very low just to win the day, and then depending wht the assets are, either junk them or attempt to sell them which ever seems most plausible.

Here is another important issue, if you are in  foreclosure and the bank bids the full amount of the mortgage, you as the guarantor or borrower no longer will have any short fall liability. The bank has in essence purchased the asset for the amount owed freeing you from any further debt…

If it is non-real estate assets and the bank bids in low or the buyer purchases for less then the debt, the borrower or guarantor will be held liable for the shortfall.

 

Presentation strategies, forget the powerpoint, the value of you.

Last evening we were scheduled to speak about our debt workout strategies before a group of business leaders. It was a great opportunity to spread the word, that there is a solution to bone crushing debt other then bankruptcy which frankly is usually as much of a disaster as is the problems it is supposed to cure.

We were in a very nice function hall in a private room setting before approximately 40 people. However for reasons that defy explanation, their audio visual equipment failed to operate, forcing my partner to forget his really terrific power point presentation…thank God.

The only viable option was to wing it, something we do well every day and so he did…explaining the benefits of our strategy without benefit of the power point program.

My partner was terrific, speaking from his heart without notes and telling it as it is. Again, he was great.

So here is the point. Enough with the power point presentation, way too much electronic presentation. Too much email, voice mail, cell phones etc etc. It’s time to remember communication used to be between two or more people directly, eye to eye, heart o heart.

Present yourself as well as your information, create relationships, let the people see who you are. This works, far better, yet we forget and are far to quick to plug it in… enough, before we forget what works…make the presentation in person.

 

Please stop believing your Franchisors projected numbers, do your own due dilligence.

I see this so frequently I must put an alert:

If you are considering a franchise opportunity, do NOT rely on their projected numbers as to what your sales revenue and therefore profitability will look like. I see far too many franchise operators who invested all they have into a huge commitment only to find ut the projections were meaningless, and the business model blows up.

I see comps based on much different situations regarding location and population density, I see pure exaggeration, I see every manner of fabrication or irrelevant comparison that people seem to be willing to invest their life savings on and take out personally guaranteed loans that will tank them completely when the franchise fails. If only you did your own due diligence and stop believing the self serving fiction so many franchise businesses provide.

If you are opening a small town franchise, why would you accept as a model an inner city franchisees numbers, they are not good comps? Why not call a few franchisees and see what is really happening, ones similar in profile to the one you would be purchasing?

You cannot simply believe the numbers provided and invest your life savings on such say-so. It makes no sense and I see so many upside down franchises because they relied on such projections that were extremely unlikely to come true.

Further, I see many franchisees that have little or no support, little or no advertising in their market, as promised all of which could have been verified if one talked to enough other franchisees and get real experience not promises from the franchisor.

It is your cash, your debt, due your own dilligence…be realistic and check out real comps, do not rely on the franchisors projections, they are too self serving and unlikely to be realized. I see it way to often…when it is too late.

 

When you have a minority % ownership of real estate, when in default of an unrelated loan… a defensive strategy.

It happens frequently, you go into default on your primary SBA guaranteed loan, or any secured bank loan, and when the bank examines your financial statement and tax returns to determine  net worth and assets  you are in title too, they see your real estate or other assets owned in partnership with others but with a minority position…and the bank wants financials and appraisals of the assets obviously with an eye towards either liquidation or at the very least determining additional net worth value for beefing up the offer in compromise requirements.

What next? Your partners would certainly not appreciate being a partner with the bank…Not at all. But the bank may be asking for an assignment of your interest or even a liquidation of your interest in the asset. No matter what their desire, it is nothing your partners want to deal with…and they do not have to if you plan accordingly.

It is not uncommon for partners to have an agreement to protect against such possibilities. It is an agreement between the partners  that states that if any partner becomes insolvent, or comes under attack from creditors, or files a bankruptcy or anything along these lines, the other partners have the right to take over the partners ownership interest in some meaningful and affective manner.

This may be described as an opportunity to purchase the partners position, although this would require cash. If it were a note the bank could take an assignment of the note and that would not work out either.

Another and better way would be to  provide the partner with a hold harmless and indemnification agreement to promise to indemnify him for the debt on the partnership asset. No cash,  yet adequate consideration that binds the deal, and it works for all parties involved.

This mechanism deflects any interest of the bank in partnership assets when the partner is in default on a separate loan and the bank is looking to foreclose on his assets. Tricky, but it works.

This mechanism can also be implemented  even after the fact of default and an agreement can be put into place at that time. It is a very important strategy when the facts line up.

 

What happens to an SBA loan when you file for bankruptcy?

This is not intended to be legal advice, see an attorney for that, but as a businessmen we must always consider the implications of many legal acts before we see the attorney,  and thus must be free to discuss general concepts. The following is a general concept opinion, see your lawyer for legal advice.

Nothing usually good occurs when you have an SBA loan and  file for  bankruptcy .

A few assumptions. You and your spouse signed the personal guaranty for the SBA guaranteed loan.

Typically the SBA can gain a position on your home by means of a mortgage, subordinate to the original mortgage and perhaps a second already on and despite no available equity, they attach in a second or third position. This usually is done only to prevent you from filing bankruptcy as once attached to your home, you cannot shake it off, even with a filing, unless you choose to lose your home altogether, which is seldom the choice of preference.

Just as unfortunately, even if the SBA did not take a mortgage position on your home, once in default and because of the two guaranties, one from each spouse, they can get a judgment quite easily in the due course of their foreclosure process. Thus they will eventually get a lien on your house, also subordinate to prior mortgages but none the less it attached and cannot then be eliminated without losing the home and will not be discharged by bankruptcy..

Even if ones spouse did not sign the guaranty, the above can occur, anyway, the only difference is that if any cash does evolve out of foreclosure the non signed spouse will receive his/her 50% share of the proceeds.

Thus while most of your credit card debt, may be discharged, and other unsecured debt certainly can be discharged, your major issue the SBA loan will not be discharged for the above reasons. So since bankruptcy will cost you your business, and will not remove he SBA debt, what could possibly be the benefit of filing for bankruptcy if you have an SBA guaranteed loan?   Nothing, nothing at all. This forces or intimidates borrowers into making payments and payment agreements they would otherwise not make. Unfortunately bankruptcy does not work on your behalf. The deal is fixed.

There is a possibility that if you qualify for a chapter thirteen and he attached SBA lien has n o equity at all to support it, then it could be discharged as against the house and then discharged from you personally depending upon all the details. Clearly you would have to seek competent bankruptcy legal advice to determine any of this.

From our experience, the SBA and its banks are not taking an aggressive position with borrowers homes and are allowing them to remain without pursuing a lift of stay from bankruptcy protection and getting permission to foreclose, unless there is more than 20% equity in the home so that after expenses something positive is realised by the bank, otherwise they are allowing the borrowers to remain in the house.

Most homes in the country are currently devoid of equity so there are few foreclosures but one will live forever under the cloak of the additional mortgage never being able to sell or refinance without confronting the SBA lien or mortgage. You are never going to get a return on your investment, so what is the point in paying the debt service? One would wonder.

One alternative, our debt forgiveness strategy, which removes debt and preserves assets. call us for a debt forgiveness, debt workout review. 413-584-2581  Norm will arrange a no obligation tele-conference for us to discuss your options.

 

Business decisions are exactly that, not moral or ethical issues.

Never before has it been clearer that business decisions are based on return on investment, nothing else. They are not moral or ethical issues, but profit and loss decisions. We need to closely inspect our decisions and determine if we are guilty of making moral decisions when it is inappropriate.

For example, what is not being discussed  in he news today is the enormous number of defaults and foreclosures on homes with its owners being solvent and able to pay their mortgages but making  the decision it is not worth supporting this debt. Home values have dropped precipitously, with an extreme  likelihood that previous high water values will not return in the next decade.

Thus borrowers who understand this imbalance are questioning the viability of making continuous payments on this investment on the asset as there will never be a return on this investment, never any equity and in fact it is to be expected that upon sale there will be shortfall…so whats the point, there is no   return on this investment so lets take the loss now and move on. The response, they stop making payments and are prepared to abandon the property, it is a bad deal.

This category of borrowers is a large and growing category willing to default even if they can afford the payment. It simply makes no sense to continue paying on an upside down asset.

Yet so many people, some who have lost their jobs, have homes worth significantly less then the mortgage yet make every effort to make payments even though they are fully aware they cannot sustain the  debt service and will soon fail anyways, yet they pay and pay and pay even at their families peril. They feel it is the right thing to do, believing they gave their word and thus must now absorb whatever pain and punishment is required to continue paying because it is a morally and ethically correct thing to do.

So what a disconnect, some who can afford it make the decision it is an inappropriate decision to waste any further investment into an upside down property and thus default, despite their contract and personal guaranty.

Others, even without the ability to pay, having lost their income, make every effort humanly possible to make payments exhausting their savings and even withdrawing from their IRA’s, feeling morally and ethically responsible for paying this debt even at the detriment of their families.

One side believes this is a business decision and default is a reasonable business response as there is no return on this investment possible. The other side believes it is a moral and ethical responsibility and payments must be made at all costs…  or loss no matter what.

I leave the decision to you, however I completely support the former, that default is a business decision that must be made without consideration of moral or ethical issues, it is a financial contract not a marriage. There are no moral or ethical issues but only  profit and loss decisions. The banks certainly do not consider ethical or moral issues, why are you?

To be responsible decision makers we must always determine what are the appropriate  guidelines we operate under. If we remove the ethical and moral issues where they do not belong, and rely on profit and loss parameters, were they should control, you will not get in trouble, you will make the right decision.  Applying moral and ethical parameters in business issues, will eliminate the profit and loss evaluation and will result in bad decisions.

There is no place for ethical and moral issues in determining the viability of an investment, only profit and loss parameters and evaluation should control.

 

The benefit of your file collecting dust in a workout negotiation.

As discussed elsewhere, when negotiating a workout, it is best to present the highest  and best offer you can that makes sense and is reasonable under the existing circumstances…and then live with it. Negotiating against yourself is a tricky strategy which can back fire as it suggests your opening offer was misrepresented, as it was apparently not your highest and best offer, and thus all credibility is lost.  Thus the question is what happens if it is refused  and the counter offer is way too large and much more than offered. How do you respond is the question?

How about with a pass….walking away. You offered your highest and best and can do no more. We say, let the file collect dust, the offer will seem better in a while. A few months later the offer will seem acceptable, as one thing is certain, there will eventually be  pressure to resolve these issues. Wait it out and try again.

Holding pat works, it demonstrates you really have exhausted your resources,  and have no room to improve your offer. In fact we frequently offer less in a few months putting additional value on the original offer and demonstrating the truth and voracity of your current situation. If the loan is an SBA guaranteed loan this issue and the payoff by the SBA to the bank on its guaranty may be accelerated with a resolution of the borrowers offer, putting more pressure on accepting the offer.

Not responding, doing nothing and getting ready for the final stages of the workout strategy is appropriate when your offer is refused. Letting the file collect dust… it gets better over time…

 

A reminder: You must be able to walk away from a deal…

We all know this, but we sometimes forget, or get lazy or worse of all allow emotional insecurities, like wanting to be liked and appreciated and thus adjusting ones actions to accommodate others emotional needs, and thus we do not walk away from a deal at the right moment.

Another parallel principle is the need to walk  away from a deal to make certain you got or get the right price.

I was brutally reminded of these two co-existing issues this morning when I went to this flea market that we walk frequently on Sunday mornings, and barter and buy junk for small dollars. It’s great fun and I get to see pure capitalism at its best, offer and acceptance, negotiation,…it is a beautiful thing. I love to watch people do business at so basic a level, determining the price  on the spot, as a direct function of what the market will pay, or more brutally what this customer will pay at this moment.

So my wife wanted to purchase something but it seemed to high a price for this item to her, even though it was a very significant discount over normal retail, but in this environment she claimed it should go for ten dollars, the vendor wanted $15.00. So she passed on it without further discussion.

On the way out he said me ‘ you go get it, knowing I would get the price down, making her feel better and I would pay for it, even better,  a double hit for her.

So I carefully folded two fives into my pocket and approached he table, looking at the item and pointing, saying it was way to expensive, she looked at it and asked me the magic question, …’what would I pay?’ Now we were negotiating and she was signaling me she would accept an offer lower then her asking price.

I said $10.00 she said no and we both walked away from it, me over to my car. Ten steps later, she reconsidered and called me back accepting my offer…$10.00.

So this is what we can learn, my wife was more concerned about how the saleswomen would feel and not wanting to pay the price she preferred to walk away or pay full price. She walked away, no win for either.

I, on the other hand, determined what the item was worth to me, made my offer, not negotiating but rather stating my offer firmly and decisively, and then demonstrated my commitment by walking away and thus even avoided the counter offer. I had to walk away to demonstrate my commitment to my offer and then her bluff being called she called me back accepting my price. Everyone was happy, a deal was made and I maintained my position unmoved by her needs and desires thus I maintained my emotional self sufficiency, not changing my actions because of her needs. In fact she made a sale and gave me my price, thus a victory for a both, a sale at the right price.

Keep this story in mind when you next are in a price negotiation, these principles work for two reasons, if you fail to get the right price, you do not make the mistake of accepting the wrong price. This avoids mistakes.You must be able to walk away from a deal to make certain you got the best price possible, and you must know your price and not exceed it even if it means no deal.

Pay attention, emotional insecurity is our enemy and is the cause of many business errors of judgment. You cannot be affected by the needs of the person selling you, you must determine what is best for you and go get it.

 

Landlord release…a possible benefit

Frequently, the banks require a landlord release to support a loan to be made to the borrower/ tenant. Usually landlords resist this, as it is certainly not to their advantage, however they usually succumb as they want the tenant and the banks will typically refuse to lend without such a document.

What it means is the Bank requires that the landlord refrain from litigation, or many other aggressive legal maneuvers  available to them in deference to the banks position which puts the bank in greater control of the borrowers destiny, removing major weapons from the lessor.

Recently this was a huge benefit for our client as the bank was willing to be far more lenient in working with the borrower then the land lord was, but because of the landlord waiver, the  bank, through its council at its expense, forced  the landlord to sit back and follow the banks lead, not suing for various breaches he could have had he not signed a waiver. This allowed us more time with less expense in working out our debt issues.

Many tenants have the benefit of a landlord waiver without knowing it, understanding it, or utilizing it in their survival and turn around strategy.

It is meant to protect the banks interests and deprive the landlord the opportunity of interfering with the banks plans by pre-empting them with a foreclosure or eviction  and possession suit.

It is difficult to generalize as a waiver can be written many ways, what is important is to make certain the Bank has acquired it and then to understand what its terms and conditions are so you can best utilize it for your benefit. It can be a real show stopper at the right moment.

Check it out, call your banker and ask him if he has it and can you get a copy of it to review. This of course will raise the concern of the bank but at the point in time you need this, raising the banks concern is the least of your issues.

It is also a good negotiation point, reminding the landlord that his powers are limited by such an agreement and moving him closer to a positive settlement that he may be reluctant to submit to, but more inclined because of the waiver. It usually is a good tool to have.

 

There should be a law against ‘time and materials’ contracts.

I can’t believe it happened to me again. I know better, unfortunately my wife does not. I never ever allow a contractor to work on my projects for time and materials. Not to say they are screwing me, or purposely over billing me. In fact it is entirely possible I am getting value for my money but it is not the way to do business. In this instance she was having two porches rebuilt, the verbal estimate was for $6000. the conclusion was over $15,000 for time and materials. Yes a good job was done,  but I had no intention of spending that much but I got the bill after the fact…. too late.

The only way is with written estimates with time and price with defined objectives and specific deliverables. Additionally an agreement about the markup of materials. Further it always helps to get at least one other bid, not necessarily looking for the lowest but at least keeping the bids in the right ballpark.

With time and materials, there is no incentive to work efficiently, quickly or at all. The pace is best held to slow as the more you work the more you get paid.

It’s open ended, in search of perfection…on it goes, never ending , the continuous bill, an annuity.

Besides, the customer never has an opportunity to decide what he wants to pay and what he wants to get for it. He only gets ongoing bills and wonders when it will end and when he will get what he wants.

A professional can bid effectively, accurately and fairly, for both the customer and the professional. The professional is entitled to a fair profit and the customer is entitled to know what it will cost and how long it will take and what will be accomplished. How can time and materials billing possibly satisfy that goal?

If the consumer market will not accept time and materials, the professionals will not continue to bill this way. Insist on a well specified bid offer well documented with time, cost and results. This works.

Conclusion, forget the time and materials deal…it never works out for he customer.

 

Customer experience, the newest focus.

I was recently confronted by  a huge demonstration by a retail chain to deliver an exceptional customer experience. I asked a few questions and got the whole picture.

The chain called Trader Joe’s has a significant commitment to high quality, reasonably priced, prepared foods. An upscale market place with competitive pricing, offering many interesting and unique offerings.

They employ three graphic artists to draw, paint  and hand write the signage for 2000 product signs, each one illustrated and hundreds of specials, larger signs featuring specials and sales and are changed each week. Each sign features graphics, art work, and special caligraphy.

Here is the point, this one store invests in the production of hand crafted signs to produce a customer experience that depicts a feeling they want,  a carribean vacation, homey, folksy, cute, friendly, inviting. comforting. Instead of utilizing standard, almost zero cost computer generated signage, the store invests $200,000 in an art department employing 3 graphic artists  full time to help deliver a positive customer experience through these custom hand painted signs. Multiply times 334 stores for a total cost of about $60 million. Wow, that is some investment  for custom drawn  friendly, inviting, folksy signs.  $60 million and it could be delivered for almost nothing if they did not respect the value of the customer experience.

People enjoy shopping at Trader Joe’s and trust their prepared foods frozen entrees and assorted unique offerings to be high quality, very good and reasonably priced, and the  signage supports this conclusion, thus the investment is deemed worthy. It works to deliver the customer experience they are looking to generate which results in exceptional  bottom line performance.

Does it work?…Absolutely.

There are unlimited ways to deliver a positive customer experience. Furniture stores that have 3D movies, candle companies that have large puppet shows, low pressure sales people that are informative and help but do not sell,  extensive sampling, three piece string trio, piano, what ever it takes to deliver a positive customer experience. This supports a buying decision and a desire to return for more.

Try it, see how it can improve your customers experience, like hotels putting a piece of chocolate on the pillow and turning down the blanket…customer experience, it makes sense.

 

A debt forgiveness workout requires a leap of faith. Leap, we will catch you.

Here is the context:

You owe the money, you cannot pay it back. You have no defense. No one did anything actionable other then you, who defaulted on the note. Your collateral is at great risk of liquidation by foreclosure auction. Your personal guaranty is exposed and you are liable for the losses.

Were is the back door?  Bad news… There is none.

There is however a pro-active strategy, which we developed,  which strips off the debt and reduces your personal liability down to an affordable payoff.

However our strategy requires a number of leaps of faith. You simply must believe  and trust even though our strategy evolves out of logical matters, there is no guaranty. The results are illusionary until we make the leap and make it happen.

You must believe that the SBA and the lending bank will forgive hundreds of thousands of dollars of debt, even millions, with small payoffs of less then ten% of the debt…sometimes much less.

Other then past success, there is no way to prove it will work…obviously, you owe the money and have no defense. You must believe we can do it. You must trust us and make the leap of faith because what we do is backwards and upside down…but it works…leap of faith.

To good to be true we are constantly told….leap of faith.

You must leap….we will catch you.

 

Assignment of notes or contracts… the strategy.

Sometimes it is important to pay attention to the small print…or in some cases even add some typical boilerplate small print into your documents as there may be important business issues that you may want to be aware of.

One often ignored but occasionally an issue is the right to assign, or  the prohibition against assigning the note.

Here is the deal from both sides of the argument.

If you are the payee, the one owing and paying to the holder of the note, the maker, the one who receives the payment having either lend money or provided goods or services and is owed from the payee.

The payee wants to restrict the makers right to assign, as the payee may have a relationship with the maker and thus an ability and comfort that they will be able to work out issues along the way and foreclosure and liquidation unlikely even in a worse case situation. However if the maker has he right to assign, he could sell the note, by assignment and be rid of the matter, and the new holder of the note may just be difficult and willing to foreclose, thus a possible real problem to the payee but a valuable opportunity for the holder.

Thus the payee wants no assignments allowed, and the maker wants to be able to assign.

Contracts have other practical issues. You may no want the provider of  services to assign your contract to another person, you wanted that persons service, add a no assignment clause. Your business may be all about subcontracting, or assigning, thus it would be mandatory for you to require assignment rights.

Now that you know these views, play your cards appropriately.

 

How lawyers sometimes inadvertently prevent business conclusions.

First of all, let me start by saying there are many excellent lawyers who do great jobs. However there are some basic facts and issues that often prevent the satisfactory conclusion of a business negotiation BECAUSE lawyers are involved.

Today we experienced just such a situation. The mortgage holder of a building owned by my client was accelerating and demanding payoff because the mortgagee was in default. We were attempting to negotiate a workout with the mortgage holder reducing the payment for six months. It was a very modest adjustment for a short time period and should have been easy to resolve.

After thousands of dollars of legal fees and a stale mate with the threat of foreclosure looming, which would have been a disaster for both the mortgagor or mortgagee,  I begged the lawyer  repeatedly to arrange a face to face meeting between her client and mine to work out their issues and resolve the issue. She was resistant.

The meeting was repeatedly rejected by the lawyer.

Finally in a fit of frustration, the mortgage holder called my client, called my client, unaware we had been asking for a meeting and said he would be delighted to meet, they met over coffee and he disclosed the clear fact that he had significant misinformation or had never been told specific information which was important for him to evaluate our request to modify the mortgage. All he knew was my client wanted a reduced payment which the lawyer had rejected.

It took a few hours and everything was cleared up and resolved with a handshake deal and two happy clients…without the help and or interference of the lawyer.

A lawyers place is to handle the legal system and legal issues. Business issues are best handled between the business people doing business.Having a lawyer interpret the story and negotiate the deal with another lawyer leaving the two businessmen out of the loop is counter productive and frequently does not work.

Business owners must do business directly, face to face, able to settle their differences and discuss compromise. They certainly can be advised by lawyers, but business should be done between the active players, the business owners or whomever is responsible for the decision and its outcome.We do not need lawyers to do this. Lawyers act as interpreters, filters and can frequently prevent a positive conclusion by inadvertently denying the business person important information, even if done without such intent.They frequently are unable to exchange the information required.

Simply stated there is a time and place for lawyer intervention, but I strongly recommend the business person do business directly and without the legal interpreter. It works much more effectively when business men deal with each other.

 

The Banks cannot and will not negotiate debt forgiveness for a defaulted SBA guaranteed loan, unless…

If you have an SBA guaranteed loan you must be aware of the facts. The banks have a guaranty which they intend to protect at all costs. The SBA, in its desire to make certain the banks do not sell them out because they are guaranteed and thus do not pursue liquidation as aggressively, the SBA holds the guaranty over the fire and will retract it if the banks do not ‘exhaust their legal remedies’ by foreclosing on the collateral and liquidating it for the benefit of the bank.

The SBA has withdrawn their guaranty enough times so every SBA lending bank understands this issue and upon default of the borrower, they bring out the heavy artillery and refuse to discuss alternatives. Their intent is to protect their guaranty, as it typically makes them whole preventing loss. Thus they over react and ‘kill the borrower”.

Borrowers are frequently confused by this apparent split personality, which occurs, and are frequently frustrated by rejected reasonable requests for support and help from the bank.

Understanding this important issue will help clarify why you are having such a difficult time with your bank if you are in default.

Once entering default, please also understand that you are only a short time period away from a lawsuit and then foreclosure and liquidation by auction. It is hard to predict exactly how long it will take as their is great variation, but be assured whether or nt it is one month or 6 months foreclosure is their only game plan and will occur if you do nothing to prevent it.

The only solution is either pay it off, come current and keep paying or suffer liquidation.

That’s the reality. The banks cannot and will not negotiate alternatives in an SBA guaranteed loan in default…unless it is approached after satisfying the SBA standards and requirements

We have devised alternative strategies which help us navigate these issues successfully, but the underlying issue is the agreement between the bank and the SBA  that ‘they must exhaust their legal remedies’ or lose their guaranty.

Call us for help, there are no alternative strategies which will provide the best solution possible for both the banks and the borrowers. We have that plan and it works. call us for help, 413-584-2581. Norm will arrange a no-obligation tele-conference for us to discuss your options.

 

How long does a loan have to be in default before foreclosure auction occurs?

This is a question frequently asked as debtors in default want to know ‘how much time they have left and what will happen?’ The answer of course varies considerably all over the country from bank to bank  and state to state,but here is what we see.

The basic standard is after 90 days the bank must pursue you and “exhaust their legal remedies” to protect their guaranty from the SBA. The SBA has withdrawn their guaranty often enough to put the scare into every SBA bank lender, thus at 90 days they tend to take off the gloves and launch their assault.

However we see a steadily increased response as banks are getting more aggressive sooner, some not waiting more then a few weeks after appropriate warning and then launching into aggressive attack as soon as they believe they have satisfied the legal requirements of default.

Alternatively we see many banks who apparently are reluctant to accept the loss and thus ignore the default at their own peril.

Of course the best excuse of all, is the larger banks are so clogged with defaults they seem to wait endlessly before they respond to a default, in some instances over a year or more. We have a few  that are over two years in the waiting zone with little sign of bank activity to accelerate the collection process.

This seems to be especially true in regards to liens or mortgages on homes. The banking system simply does not want to recognize the loss and certainly does not want another home it must insure, maintain and own for an indefinite time period so they also tend to bring things to a foreclosure head and then pull out of the process and wait, not certain for what, other then to avoid taking the loss and owning the property.

Keep in mind foreclosure is a very expensive process estimated to cost the banks approximately $35,000. for a home foreclosure, as well as ongoing expense for holding the property and the negative effect it has on its financial operations and specifically maintaining FDIC mandated proper liquidity ratios, which are depleted by foreclosure. Thus waiting is the game, fairly unpredictable and controlled by state statutes, however in a word it takes a long long time to kick you out of your home.

Commercial property is likely to experience a faster response, quicker to liquidate by auction. Once again the same issues prevail, they want to hurry bur frequently cannot, because of the same barriers, however in view if the banks need to liquidate collateral to receive their guaranty they tend to be far more aggressive with commercial property and attack much sooner as it is easier to liquidate.

In a nutshell, commercial property is being foreclosed on faster, homes slower. We have many strategies to either accelerate the process or slow it down significantly all depending upon what works for the borrower and what our objectives are.

It is all a work in process, and the real answer is the time involved in the workout process can be influenced dramatically in either direction, faster or slower, and in view of this ability to affect the result, we include these strategies in our overall workout plan. The point being we must be pro-active in all aspects of a debt workout, designed to support the best interests of the borrower.

It is a controllable issue.

 

What are you waiting for, workout your debt now! Bankruptcy is NOT the only bail out plan for debt forgiveness..

The statistics tell the entire story, over 5000 bankruptcies per day are being filed and those that are business oriented could have been worked out. Either saving the business by stripping the debt so the business can continue and/or reducing dramatically the personal guaranties through a workout. Bankruptcy  is NOT the only option. Workout your debt while preserving assets and  live to play another day without losing everything you own…including your home. That is the best plan of all, a small business bail out plan that works.

Yes it sounds too good to be true and no it is not just a matter of arguing louder, begging for leniency or modifying current debt adjusting amortization schedules or interest rates, it is all about massive reduction of principal debt, a goal that can be achieved with a workout plan that is expertly prepared and delivered…yes it is part science, part art, a little reality and a better result for all involved, bank and borrower.

I have spoke often about the incredible success we have with our workout strategies, but it is clear few are getting the message. Those that we serve are experiencing the second chance opportunity we provide, the others are faced with annihilation by the secured lenders, the banks, or prefer bankruptcy another form of self destruction.

The problem is, those that attempt to do it on their own, fall into a myriad of traps, barriers and obstacles that only experience, skill and expertise can lead you through. Do not attempt to do this alone, on your own, with pure logic as your guide, if only the banks were driven by such realities.  They are certainly influenced by these guidelines but influence alone will not prevail or deliver the desired result.

A few suggestions on  while on your way to finding a workout advisor capable of leading you to your desired goals:

1. Do not wait until you are cleaned out, on your last leg, out of cash and out of steam. Do it when you see the end is inevitable, but before all is lost and spent.

2. Accept the reality that revenues are down and will remain down. This is not a speed bump we are experiencing but a changing economic environment that will not be returning to the accesses of yesterday for a long long while. Plan to live in today’s market as this is what it will be.

3. Downsize!

4. Prepare your financial picture to represent exactly what is necessary to present yourself in the light most beneficial to YOU, not the bank.

5. Get effective representation, not a bankruptcy attorney.

6. Be prepared to accept change.

7. Re-invent yourself. the objective is a soft landing…

8. Workout your debt safely.

It can be done, but remember, if you go to the bakery you will get a loaf of bread. if you go to the meat market you will get meat. if you go to a bankruptcy attorney you will go bankrupt. Find a workout specialist and get a workout.

Call us for analysis and options, 413-584-2581 Norm will arrange a no obligation tele-conference. Explore your options.

 

Unique insurance for older buildings

I spoke with a prospective client yesterday who revealed some valuable information I was unaware of regarding the insurance risk on older buildings. Buildings that are grandfathered in under older zoning laws, not required to come current to todays code requirements. Here is what I learned.

There is fire insurance available for older buildings which includes upgrading to current code requirements. Thus as in his case, when he experienced a fire of over 30%  of his building he was required by the city to upgrade the building to current code requirements and this extra insurance he carried for just such a risk covered the costs of this upgrade. He explained to me the newer code requirements included additional bathrooms, wiring issues, and many other costly requirements.

It cost approximately $150,000 for him to bring the building up to current requirements and if he did not have this type of insurance he would have taken a huge loss, as he would not have been able to afford the rehab of the building and he would have lost it all together.

Just a word of warning to owners of old out of code buildings. This type of insurance seems like a very good addition to a standard insurance  all risk policy. Ask your agent about the cost, it may be worth it.

 

You cannot afford to be the bank for your clients…do the math

As credit disappears, and it is all but gone, as every business owner is scrambling to collect receivables and postpone payables, we are in this giant tug of war.

Still trapped in the misguided belief that we must offer long payment terms or you will lose the business. So net thirty in many instances becomes net 45 or net sixty and this is deemed ok, as that’s the way it has always been done.

This may have been the case, although it is a concept I never believed in, but let’s do the math.

Payroll comes every week, along with the taxes, overhead requirements rent, phones, utilities, etc, comes monthly like it or not. Thus if you are selling net 30 which becomes net 60, you need two months of payroll and overhead to tread water without any reserves. Not to mention the huge investment in the cost of goods, inventory, work in process, rejects, etc.

Few business I know have that much available capital. So why are you selling on net thirty and allowing net 60 terms? You cannot afford it. It’s an act of futility, or make that financial  suicide. If allowed to continue this policy will put you out of business. Get smaller if necessary, but get paid.

 

Profits are being squeezed by more then just reduced revenues, its a new buying attitude.

As small business owners we all understand the concept of loss leaders and the high profit items. We have in the past provided stripped down items as a starter option, the basic package, with profit bearing add ons available. The opening order with expansion opportunities in mind.The profit loaded onto the add ons the upgrades the ‘better’ option, the top of the line.

In many cases we have built our profitability on these concepts. It has worked for years as the customers immersed themselves in consumerism. in the spirit of buying more then they needed, spending more then they had, using credit lavishly and never really caring what it actually cost. This was a very profitable strategy.

This worked for years and fattened your profit picture. What is happening now is not only a huge contraction of  gross revenue, but worse yet a huge contraction of net profit. Now the consumer is buying the stripped down models, the less profitable entry level option without the added bells and whistles. They are satisfied with the loss leader and leave without the options. They buy the sale item without adding onto it with more profitable purchases.

The tried and true loss leader concept is now  no longer the rule. Without the add on the gross revenue is deceptively higher while the net profit plummets. This is very dangerous and must be better understood as the consumers habits are changing and your marketing methods must also change if you are to stay viable and profitable.

This is happening at every level of the market place be it service providers or product sales, the consumer is getting very savvy and has less credit, as well as less desire to collect expensive merchandise or unnecessary services. Now they want value and carefully consider their purchases opting for what they need not what they want. Thus more lower  level, less expensive computers are selling then full scale loaded computers, reducing margins dramatically yet satisfying the consumers needs.

Plan accordingly, the add on attitude, the up sale, the cross over sale, the impulse buy, are concepts of the past. You must find a better way to market, a more profitable way, as this approach no longer works.

In fact maybe the secret remains as always, figure out what the consumer wants and give it to him, profitably. Maybe you need to learn how to sell the stripped down model, the basic package, the ‘loss leader’ at a profit, enough to make the business flourish.

If the loss leader is going to bring the customer in, then sell it profitably.

 

What not to do in a debt forgiveness workout negotiation, and we see it all the time.

Business owners like so many people, make basic errors in the  negotiation process which have serious detrimental affects on the outcome. Here are a few I see over and over.

Failure to communicate. People tend to hide out, not wanting to confront uncomfortable situations, preferring to ignore it, possibly hoping it will go away. It won’t go away and failure to communicate only makes the situation far worse then it has to be. Respond meaningfully and on time. It is the only strategy that works.

Hiding information, refusing to provide requested information. This too can be fatal to your cause. Eventually the truth comes out. If not then inadequate reporting will result in an unsuccessful workout as this error allows the lender, workout officer to make whatever judgments he/she  chooses and can get away with it because you failed to provide what was asked for. Worse yet, they assume you are hiding information and thus look questionably at  everything else you have provided.  Actually what happens in such a situation is no workout will occur at all, as insufficient reporting will result in a full payoff demand.

Worst error is to lie. This will be discovered and then all is lost as nothing you say will be considered credible once a lie has been discovered. Don’t do this it is fatal. Some believe they will never find the truth out. They will, the truth always emerges. Somehow everything that is important surfaces and is revealed. If you hid it, or lied about it,  and it is discovered, you are doomed in a workout situation.

We tell our clients to tell us all, we can prepare for anything if we know what we are preparing for. Most any situation can be presented in a light most beneficial to a positive conclusion…if we do not know we cannot prepare.

Do not ask for or expect the impossible. This is also a failing approach. One must be realistic about a workout. I see business owners requesting impossible workout solutions. This impedes progress and is likely to result in a poorer conclusion then could have been reached had the borrower been more realistic and aware of the guidelines for the process. Get guidance, it makes sense.

The best advice I can give, is do not do your own workout. Get expert advice. It can be fatal or at best not as successful if you attempt to do your own workout. There will be a conclusion but it is unlikely it will be the best possible conclusion.

 

How to negotiate a debt workout when your lender is vehemently opposed to settling.

I see it all the time and thus am not particularly moved by such resistance, although many fold up because of strong opposition. In fact when it occurs I know I am near the end and have won.

Hard, arrogant, emotional, name calling, obstinate, absolutely immovable objections a definite  NO. I know I am winning.

Here is what I do. Ignore the emotional outburst, ignore the aggressive absolute rejection and keep focusing on the resolution I am proposing. I keep bringing it back to the ground, agreeing with all the objections but suggesting that my proposal is as good as it is going to get and worthy of consideration. It takes time and patience and it works.

Assume the results will be as you are projecting and ignore the static. Keep repeating until your opposition vents his emotions out and logic seeps back in. It may require a day or two to settle in or even a month, but in the end perseverance, lack of direct argument and if you are right , you will win. Perseverance and logic will prevail over emotional outbursts in most situations.

This requires careful listentimg skills as in somne instances the opposition is totally committed to their position and will not accept compromise, but  in the greatest majority this startegy succeeds.

You know you are losing only when all talk breaks down. No communication and no response is deadly. This is a sign and is indicative of a stalemate. As long as your opposition engages with you, you are in control…as long as they are yelling and screaming and saying absolutely NO,  you are in the lead and controlling the outcome.

Be cool, do not argue, and know this will work. It does.

 

Public approval of unions, down, lower then ever.

Change. That is what the context for our  current business theater is all about. Change at all levels. The consumer and his buying habits are changing, credit availability is changing,  savings and credit card use is changing, employment is changing, management is changing, the dollar is changing, unions also are confronting a changing attitude.

Recent Gallup polls reveal that for the first time in its poll taking history since 1936  more then 50% of the country believes Unions are harmful to our economy.   That’s a huge wow! As large a change as all the other changes that are occurring as our business  markets reinvent themselves and  tries to figure out what they are and where they must go to regain their profitability and power,  the people are saying that unions have a limited place in our economy…or perhaps no place at all.

While it is true that those in the union, enjoying its benefits are far more satisfied, the overall culture of acceptance is changing.

‘Gallup finds organized labor taking a significant image hit in the past year. While 66% of Americans continue to believe unions are beneficial to their own members, a slight majority now say unions hurt the nation’s economy. More broadly, fewer than half of Americans — 48%, an all-time low — approve of labor unions, down from 59% a year ago.’

The update also comes as the Employee Free Choice Act — a proposal to significantly change collective bargaining laws — is still under consideration by Congress. If passed as originally proposed, the bill would most likely make it easier for unions to organize. In fact, proponents of EFCA (who feel the current system is stacked against unions) say that’s the intent. However, those changes may be going against the tide of public opinion, which currently is at a historically low ebb for unions.

The trends seem to show people are getting increasingly fed up with unions. Certainly the defined benefit pension plans of public workers are nothing short of outrageous as well as one of the primary reasons many states and municipalities are in deep fiscal trouble.

Waning support of unions is a good thing. However the unions deep entrenchment in our political system suggests it is unlikely the politics of the situation will allow for deep systemic changes and so this legislation is likely to be passed…it’s a vote getter, and thus the politicians will probably sell themselves out for one more vote, as usual, despite growing public opinion against it.

It appears greed remains an acceptable life standard be it our corporate leaders, our unions leaders or our government. It appears to be in control, despite the peoples changing opinions.

If true change is to occur, for the benefit of all,  greed must be routed out and ‘for the people by the people’ must emerge again, or we will see changes we do not want to see.

 

One sixth of all construction loans are headed for default…call us quickly, we have a plan.

Reports  recently filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks and a huge problem for borrowers.

Construction loans were highly attractive in recent years for many banks, particularly smaller ones without a national presence. One reason was that other types of loans were not easy to make, thus they became great loans for local smaller banks, banks typically less able to support and successfully absorb major losses.

The real issue from our perspective is the workout potential for the borrowers. Working out smaller local bank loans is frequently more challenging then working out larger national bank loans as each loss is more damaging with small banks as their capital position is obviously less then with larger banks. Thus they tend to be more difficult to work out as successfully.

However, our results have been equally stunning, be the bank large or small. The major issue is the borrowers enter into workout discussions way too late and without adequate experienced representation.Their capital is exhausted and thus their options are limited.

If real estate is involved such loans require far more to work out then other types of business loans. The bottom line is call us as soon as you recognize the symptoms  requiring a workout strategy.

The sooner we get involved the better the results will be. 413-584-2481 Norm will arrange a tele-conference for us to discuss your  options.

 

Second Wind Consultants take their small business bail out plan, a debt forgiveness battle, to the streets…in MA and NH.

Ours is the only small business bail out plan….and it works.

Our strategies allow us to strip off most of a small businesses secured, unsecured and personally guaranteed debt, while preserving assets. ” It sounds too good to be true says most people who speak with us” says Don Todrin the companies president, “but  our credentials, references, experience and successes are so strong,  most who call retain our services and  get the second chance they need to survive and grow in this down economy. There are no other viable options, we believe, certainly none better. “

To better service our New England clients we have recently committed to partner with a small business consulting company, out of  Newburyport, MA, The Octopus Solution,  Eric Curtis and Bill Nolan, its two principal partners. They will represent  Second Wind in Massachusetts and New Hampshire.  They can be reached at: 617-283-8914 and  learn more about them and Second Wind on our web site and blog.

Sean Rosser, out of Rhode Island,  continues to be the director of Field Force Development and will oversee the  hand to hand combat.

We have additional expansion in development but we  first  will firmly embed ourselves in the New England market, were we can support it fully.

It is a war. Let there be no question about it.

Our economy will get worse before it gets better and it will take a long long time to fully heal. What we have now is what we will have for quite a while.  If small business owners are to survive and succeed in this  recession, you must learn to operate under today’s conditions without expecting any miraculous return to yesterdays excess.

However if we reduce your debt you can adjust effectively and grow your businesses safely and profitably.

Thus we formed our war plan and devised our strategies.  We go to battle and win daily, helping …one client at a time, survive, succeed, emerge, grow and prosper.

Call us in New England, 413-584-2581,  call us from were ever you are, while we service all 48 states, in New England we deliver….. door to door service.

 

Don’t attempt to negotiate debt forgiveness in a workout situation.There is a better strategy.

The basic principal controlling a workout settlement, is the debtor  has no ability to pay as agreed…. thus the creditor is willing to accept less then what is owed. Makes sense.

Integrity and credibility is critical in such a situation. For a workout to succeed the creditor must believe the debtor cannot pay as agreed and thus it is worth it to settle for less.

Here lays the issue. Most business men have a misconception that it is al about negotiating a conclusion, offering less, coming up with more and settling in the middle somewhere. NOT SO!

Here is the deal. If you offer $100.00 and then with objection from your creditor come up to $150.00, this implies you were lying, and had more to offer and was trying to beat the creditor and get away with less then what was possible despite the fact that you are looking to pay less then owed, debt forgiveness.

The only honorable and successful approach is to offer exactly as much as you possibly can and ask forgiveness for the rest. For this to work the offer needs to be as much as it can be. Thus there should be no negotiating, since you made the best possible offer possible. So when pressed for more the answer needs to be, ‘I have offered you as much as there is available I can do no better’. This is credible, has integrity and if believable will succeed and be accepted.

The moment you offer more, as in a negotiation, you are then demonstrating that you are not acting out of truth and with integrity and  you really did have more to offer and were holding  despite your plea for forgiveness thus anything you then say is neither credible or honest  or believable and the workout should and will fail.

Do not expect the bank to follow these rules as they may want to enter into a negotiation  and counter offer with a higher but still compromised payoff amount. You must hold your position and maintain the integrity of your position” I already offered you all I have to give, I am not negotiating I have nothing more to negotiate with”, you explain to your creditor.

Make your best offer that is real and believable…. and stand on it. It is what it is and you can do no more. That is your context and the basic reality in any workout. It is not a negotiated conclusion.

 

Up sell…down sell…. works with more then just french fries.

We all experience up selling, most frequently for example at fast food restaurants, when you are prodded to order extra items, be it french fries or deserts, and you have all participated by agreeing to the prodding and ordering whatever  additional items that  are  being pushed.

Another successful strategy we all have experienced is down selling,  occurring when a potential customer does not close on the sale, a less expensive option is suggested and frequently settled on.

Both strategies work very well, as evidenced by the extensive use of them in so many retail situations.

Perhaps you should review your sales and marketing strategies and determine if there is opportunity for either strategy  in your sales and marketing efforts.

The simple point being once you have actually attracted a potential customer into your lair, you need to find a way to help  them participate in as valuable a buying experience as possible.

This principle can apply to any sales opportunity, if the small business owner considers this approach, he most often can devise both up selling and down selling options.

Review your sales efforts and make certain you provide for such options and are implementing strategies to include them in your sales presentations. Train your sales people to sell in both directions when appropriate.

 

The hidden power of the second UCC position. Be careful.

We all know he basic rule: First to file is first in priority and  therefore gets every dollar it is owed before the second lien holder gets anything. The second UCC filed, the second in priority, gets its first dollar only after the first priority lien holder gets all that is owed to them.

That’s the rule and this usually means the second lien holder gets nothing, because the only time this is meaningful is usually in a foreclosure/defaulting situation and then it is unlikely that the first lien holder will ever get all it is owed, thus the second lien holder usually gets nothing.

So, if the second lien holder gets nothing so where is its power? It is usually considered powerless so whats the deal.

The fact remains the second lien holder is attached to the collateral. It must be dealt with in some way or its mere existence without release can prevent the transfer of the title of the asset it is attached too. Thus if a sale  of the asset is arranged the second lien holder must release for the transfer to occur a that moment the second lien holder has power to stop the transaction from happening.

The only other option is for the first lien holder to foreclose on the asset and thus blow off the subordinate debt, it being discharged along with the lien. Problem is this frequently requires business interruption and the purchaser is long gone no longer interested in what remains. Thus the second lien holder, while not entitled to a payoff is positioned strong enough to interfere with an orderly sale and transition, and thus stopped the desired result.

Therefore the buyer, or seller, or first lien holder bank, sometimes pays  the second lien holder with some modest payment as incentive to release and allow the first to sell and collect all that is available.  The point…the first lien holder can always foreclose the second out, but then frequently the sale is lost.

It is sort of payoff money, a kick back to leave so the first can collect more then it would through foreclosure. This can be a very strong and compelling argument that gets sufficient attention to get a handout that is undeserved but sometimes paid.

Thus be careful when you confront such a situation, it is not as black or white as it may at first appear, the second lien holder can be a deal breaker or force a payment it is not entitled to receive….but does get anyway.

 

The importance of attention to detail, the zen affect.

I am a broad brush stroke type of man. I see the bigger picture, can plan the grand scheme and can when required put the details necessary for implementation into action, but minutia is not my preferred expertise.

There are however many in management positions who thrive on the myriad of details that are all required to line up in order to produce a chain of events that collectively work together,  yielding the desired results.

Both are critical applications, two sides of the same coin. Both need the same attention for the desired results to be reached.

This weekend I had the pleasure of attending a family event, a large weekend party with over a hundred guests, most traveling far to attend and staying over in near by hotels. Being a friend of the family, my wife and I and my daughter attended both as guests and as kitchen helpers, the support staff, charged with delivering the many meals on time and beautiful in every way, taste of course, presentation and timeliness.

Not an issue, as we had competent experienced friends, women,  capable of turning this out in their sleep. I was the sole man in the kitchen, a place I frequently migrate to in such family events and help out as best I can, doing whatever task I am asked to do, but never playing a management or decision making role. For some reason I find the entire process interesting and I love being a kitchen helper during these type of events, but is it the woman who are in control, appropriately so. It is most often their territory.

I learned something about attention to detail  during this event, that I never considered before, I call it the zen of detail.

I was charged with cutting up a half dozen large red peppers for inclusion in a bean salad. Not a huge task and certainly not very complicated. I got the usual instructions about size…and off I went for about five seconds when I was stopped and  given a lesson of how it was really to be done, as obviously I had no idea how to perform this  complicated task..at least to the satisfaction of the head mother.

So I watched, listened, learned and then to my absolute amazement, I was taught to cut the pepper into equal strips and then carefully cut each strip with a zig zag cut creating little tiny triangles.

Really, I questioned, equal sized little tiny triangles, which of course, I did, wondering every cut, why would they want equal sized tiny triangles? Was this something about the pepper regarding taste, grain, or something that required such angles which I had never heard about…advanced cooking, perhaps?  What could possibly be the reason for this exercise I pondered, and finally asked, and with a cold stare suggesting my question was totally out of line I was told  ‘it is better this way’…and then with an equally quizzical look she added, seeing I had no idea what she was talking about…’it looks better, all uniform little triangles…much much better.’Just do it’ she said, ‘do not question’, and  I immediately jumped to and cut millions of little equally sized triangles out of pepper strips I carefully measured out and cut to uniform size.

When the meal was served I stood next to the bean salad dish and watched the guests scoop out their desired portion, waiting for the oohs and ahhs over the perfect little triangles, and heard no comments at all. Not to be undone, I furthered my research by occasionally mentioning while standing  in line that wow, look at those nice little pepper triangles, to which no one ever responded.

Then getting more aggressive I began poling the line and directly asking what they thought of the bean salad, to which I got many compliments but not a single mention of the triangles. Finally I resorted to the direct question, ‘what do you think about the little red triangles in the bean salad? To which I got blank stares suggesting people were wondering what planet I was from.

My conclusion, not one person out of the hundred noticed the triangles other then the mother in charge who ordered me to perform this task.

Here is what I learned:

The food was terrific and everyone ranted and raved about it. While no one may have noticed the red triangles, everyone said everything was the best. I began to understand the zen of detail. The attention to detail throughout the entire preparation created a vibration of care and consideration. The food was prepared with exacting precision and was all quite excellent. While the guests did not see or understand the commitment to precise preparation, they could feel the care and love that went into the preparation and this enhanced the entire experience for everyone.

Yes the red triangles were invisible, but the bean salad was adored. Recipes were requested and every morsel was eaten with the same appreciation as that which went in to its preparation. The joy of preparation, the attending to the minutia  all helped create the vibration of excellence that while hard to point to specifically was apparent throughout.

My taking the time and effort and putting in the care and consideration to do it the right way, the way the head mother desired, and the way it was  presented, created an aura of excellence that was clearly present appreciated and admired. It was the details that supported the entire success of the food. The sauce on the salmon, the rolled up silverware, in cloth napkins…all the tiny details, that lead to and supported a terrific experience. Did anyone notice the details? No! But they all had a fabulous, experience and that was a direct result of the commitment to detail that the cooks all adhered too.

The business lesson?…the same attention to the details will portray a business which cares, delivers and has the aura of excellence.

The customers may not see the specifics of the details but they experience the overall vibration, the energy of the business and if detail is attended to, the vibration is very good indeed.

Always remember the little red pepper triangles when you begin to consider eliminating the small painstaking, time consuming, almost invisible details of your process. It is the zen of the details that supports success.

The love and care that went into that meal was truly present in the bean salad  partly because of the little red triangles of pepper…I am convinced.

Make certain you have adequate little red pepper triangles in your business. If not reconsider your process and approach. Let the zen of detail permeate your business and provide an aura of excellence for your clients to enjoy.

 

IRS non-collectable status? Good news! Not really.

I talk to many people who have achieved non-collectible status with the IRS collection process and they celebrate, seemingly enjoying a victory. I guess it s a victory of sorts, a least they will not be bothering you with collection and or liquidation procedures for a while, but what does it really mean?

It means you have a life time to deal with this issue as it may be dormant but it did not go away.

It may feel as though you have won, no more threatening letters, phone calls or collection efforts, but has it really ‘gone away’.

A resounding NO!

It has been put into the computer as noncollectable and thus taken out of the active files.

BUT IT IS STILL THERE WAITING FOR YOU TO DO SOMETHING TO AWAKEN THE SLEEPING GIANT.

Any publicly recorded event, any attempt to get a loan, sell a home, buy or register a car,  will awaken the giant who will then appear in all its glory and power and resume the collection process.

So, if you plan on living under a rock for the rest of your life, noncollectable status is fine, fine, for a street person. If you have any intention of doing anything productive with your life, this issue must be dealt with and concluded for once and for all, as noncollectable status is a long term death wish not salvation.

A much better approach is an Offer to Compromise, especially following  noncollectable status as the service has already determined  you have no assets or capability to pay, what an opportunity to wipe out the debt all together, for ever.

So celebrate for one evening and then get to work the next day  filing your application for an Offer in Compromise. That is a plan that works.

 

You say the SBA does not have a mortgage or lien on your house so ‘its safe!’ Not so!

If only it was that easy. Unfortunately they are smarter then that and have laid a trap for you that many fall into unbeknown to themselves. The personal guaranties is a path to everything you and your wife own.

Keep in mind that almost every SBA loan we see and certainly many non SBA guaranteed normal secured bank loans require  spousal guarantees on the notes.

This may appear harmless in the beginning when all is well, but in the end when default is looking and you review your exposure, please count your home as ‘in jeopardy’. It too will be additional collateral to the loan, as follows:

At some point in the default process, the bank will seek and get a lien on your home. That is as good as a mortgage as it attaches the note to the collateral home. They get there by following the two guarantees provided from the principal borrower and his/her spouse.

Thus when push comes to shove, your home is in jeopardy and becomes a target for either liquidation or simply pressuring the borrower into compliance on some level more then one would provide if the home was not at risk. That is the reality…One way or another the SBA will get to your home and every other asset you own.

The answer of course is to workout the debt and settle it for affordable losses, and not risk losing the house altogether. This is discussed elsewhere in this blog, however the important point to understand is that once the spouse signs the guaranty, everything the family owns is then collateral for the note and can be liquidated upon default, liqidated by foreclosure and auction

 

Lets have a party!…and improve your business.

Everyone loves a party, an opportunity to meet new people, and have fun! Yes, true, but  what can this possibly have to do with your business?

It’s called marketing and the concept goes like this:

Business relationships are exactly that, relationships. Relationship building is critical to business success. Thus whatever we can do as business owners to improve, develop, nurture, support, relationship building with our client base, is a good thing to do and aught to be considered in your marketing action plans.

Second point: Your best source of new business is from existing clients, whether it be referrals or repeat business, there is always much to be gained by getting more involved with your client base.

It may be a golf tournament you promote, a midnight party at your office, food, entertainment, drinks,   Saturday bar-b-que  drop in, food, greeting and enjoying getting to know your clients better.  Low budget, high return.

Its simple: Saying thank you to your client base for the business support they bring you. Showing them  respect by offering to entertain them, whether they come or not. Spending time with your clients, a huge demonstration of respect. Even giving your clients an opportunity to say, ‘Hey your services were great, I want to thank you…or, I was thinking of you when I got your invitation and wanted to drop by to ask you to give me a call, and enjoy your hospitality, or maybe it is an opportunity for a client to bring a friend along who may be interested in your services, OR BEST OF ALL, A CLIENT WHO JUST COMES TO HAVE SOME FUN IN YOUR ENVIRONMENT.

In this day and age of gloom and despair, declining revenues and financial disaster, a party announces that you are in a positive frame of mind and this is very attractive in a down turned economic environment. As people need to remember to relax in times of stress. Be the leader show them the way. This also demonstrates you are on a positive up beat trend and people will be motivated to come and join your energy.

All this because you bothered to have a party, an event of some sort, where business is the second objective and meeting and greeting the first.

Your competition cannot beat this, as relationship building is key to trusting and trust is the basis for doing business. Trust is a competitive advantage that gives you a major edge.

Obviously you are doing his to create more business, but the fact that you are doing it and the fact that your client base participates means many good things will evolve out of this simple act of graciousness. …having a party, a bar-b-que, a social event of some sort to bring your client base to you for a large dose of respect, care, consideration, attention,  fun and yes appreciation.

What a great idea. It can be promoted as an anniversary, a simple client appreciation event, it can be a charitable event, whatever excuse you can invent. If done well and done with total consideration for your guests, it will have huge impact.

Promote it well, and be personal with all who come, thanking them and engaging them  in the idle social chatter that we all are very good at, have good food and drink, and demonstrate respect.Most of all have fun…have a fun environment and everyone who comes by or even hears of it will feel better about themselves and your relationship with them and good things will flow from this effort.

Yes its called marketing….try it, it works

 

Going for the business home run!

I see it more often then one would imagine…small business owners attempting to turn their fate around by going for the homerun, hitting it out of the park! Then it’s easy street. This plan almost never works. Yet despite the odds, too many small business owners believe in the one big order to save the business theory…and they waste their precious time chasing windmills.

Yes there are many examples of such events occurring. It does happen. When it does there is cause for celebration, assuming you can deliver and the price is good enough to allow a profitable exchange, but to make this an obsession to the exclusion of doing repeatable, profitable day to day business, building slowly but surely is a huge mistake.

Seldom can we hit the homerun to win the game. It happens when you least expect it, it happens when you are just trying to hit the ball, it happens when everything you are doing is being done well. Thus making the homerun the plan is a plan that is unsustainable and unlikely to carry your business were you need to go. Do business correctly, efficiently and consistently and you may be surprised with an occasional homer.

It’s ego controlling your decision making,  unwilling to build one brick at a time, waning the glory if immediate satisfaction,  rather then taking pride in building something solid and successful over time. The tried and true method, the best method. In these times maybe the only method.

Worse yet is the man who seeks out only long shots constantly swinging for the fences believing one will go out of the park…If only it worked that way. The truth is if your plan is to hit homeruns, your plan will fail, if your plan is to do business effectively then occasionally you may get an extra base hit…

Don’t ever stop dreaming. Keep looking for opportunity, but stop making your plan based on the home run theory, it is not the way to win games. be appreciative when one goes out of the park, but this cannot be the plan.

 

Who ever said 2%10 net/30 is a requirement? What are your invoice terms?

Cash flow can be as important as gross revenue, especially in this recession when revenues are down and expenses are high. Having the cash available to use  is critical for survival rather then waiting endlessly for it to show up…its in the mail,  they say…we all know that one, seems like it takes weeks for the mail to arrive these days even months.

So who created this requirement? Whom ever it was, it seems to be the way of the business world and I say enough!

We are not banks. We do not make loans, let alone unsecured, non-guaranteed loans. We need our cash when we ship. I ask again. Why do we all believe we must extend terms? Some say if we do not we will lose the business. I say Good! Maybe that business is business we do not want to have in the first place.

We must invest in the raw materials, pay our overhead, pay our payroll, ship our goods and then wait for 30, 45, 60, 90 days for payment?

Think about how much smoother our business operation would be if we received the payment in  5-7 days, or 10 days, respecting the client enough to allow them to see the product or service, determine if it is delivered as ordered, write the check if it is acceptable and mail it to us… 5-10 days at the most. That works.

And what is this 2% 10 net 30 all about. Now we are discounting to get paid in ten days as if the customer should be rewarded for doing what he should be doing anyway?  Paying the bill. I definitely do not get this at all.

How about penalizing late payment after ten days. I repeat we are not banks, we should not be lending our customers money or allowing them to use our goods and services before they pay for them.

Some say that our competitors provide such terms so our customers will go elsewhere if we require tougher payment terms. I say let them go, they are not the customers you want. The times they are a changing, and we cannot afford to accept long payment terms, rather not ship at all. Revenues are down, expenses are up and we must squeeze every dollar we can out of out of our cash flow to survive and grow again. Its time to evaluate our terms and conditions.

You must be providing goods and services that are unique, valuable and demand loyalty to your  business and  so you deserve the terms you demand, and if you have not accomplished this then it is you who are not doing the job effectively enough to warrant such payment terms, then change your ways. Do a better job, provide more and better service, and enjoy better customers, faster payment.

My bet is, that if you get paid in 5 you will be able to deliver faster, better, and with greater quality and will be so valuable to your customers they will want to pay you a soon as you require. That is the answer.

Another approach, although not as valuable, is to mark up your invoice and allow a deeper discount for immediate payment, but make them pay for the borrowing. More then the 2% everyone wants to give away. I say mark it up an additional  10% for net thirty and then discount it the ten%  for payment in 5 days…So now  if they want the terms they are borrowing the money and paying for it, reasonably enough to warrant the extra 30 days time. But if over thirty another 5 %.

You get it, if they want to use you as a bank then charge them for borrowing. If they want to buy in the due course of business then they should pay upon delivery or shortly thereafter.

Announce this and you will see how good a job you are doing. If your customers head for your competitors then you must review your policies and procedures,  you are not fulfilling your mission adequately, if they remain our customers you just increased your cash flow tremendously. Congratulations, job well done. Enjoy your business rewards.Find out and do what is appropriate.Survive this recession.

 

Orphan products? A new key indicator?

Orphan products, now there is a concept new to the market and being carefully measured by many savvy retailers  for both on line internet sales programs and in the store. I believe it applies everywhere, because it is an indicator of a changing mentality, a new context, a ‘less is better’ context that is changing the way America shops and retailers market.

What is happening is customers are filling their shopping cart with numerous items and then abandoning them at the check out counter or the market basket on line.

One retailer that does a huge on line business  reported orphan items left on a shopping cart order and then abandoned when it came time to check out was over 68%…huge.

In retail stores, numbers upwards of 58-64% are being reported, with significant increases over last year, same time.

What is happening s a weaning of the public from their favorite past time, shopping to now  buying. They still love to shop, but now there are self imposed limitations. We are seeing shoppers in line checking out asking for sub totals along the way and when they reach there own pre-determined limit, they leave everything else in the shopping cart and close out the sale. Alternatively, they are asking themselves, as items are being rung up, do they really need this or is it just a want and rejecting wants for needs.

Returns are also way up, as buyers become remorseful when they get home and return the items for cash, not credit as previously deemed adequate, knowing they may not be shopping again  so soon.

Many in  check out line buyers are abandoning closing out the purchase because of add on fees and expenses, causing the buyer to question the need of the purchase. In fact one major national retailer has programmed into their on line web site, a bounce back screen allowing the customer who has abandoned a certain dollar value of purchasing to waive shipping and handling fees if the order what they chose and decided to abandon.

The point is, America’s purchasing style is changing. Retailers, service providers, everyone selling anything must grasp this and make adjustments accordingly.

Not only are the old days gone, do not wait for them to return  for a long long while if ever, you must lower your revenue expectations, change your business equation and look at debt forgiveness as a way to survive and stabilize, ready to grow again…slowly but profitably.

 

Retailers, wholesalers, everyone….be prepared, there will be no Christmas this year.

There are certain seasons that you all count in for sizable revenues. Back to school is one, Christmas is  another,  representing two of the most important spikes in the years revenue flow for the consumer market place.

We are mid way through the back to school spike and it is not spiking, it is very flat, as if it did not even occur. This is very bad news for many who depend on this seasonal spike as a second Christmas. Speaking of which, Christmas, the one season many count on for as much as 40% of your annual revenues collected between Thanksgiving and year  end…short and oh so sweet…..not this year, sorry. Christmas will not come this year, at least not to the consumer market place.

We must change our mind set, as these results are now very predictable and should be no surprise for anyone. With massive layoffs and unemployment, skyrocketing foreclosures, crashing stock market, there is far less interest in big time spending as we have gorged on in the past, and far more interest in paying off debt and saving some money. The consumers have changed their ways either by choice or by necessity.

Even those with jobs and savings, not in foreclosure danger and secure in their future, are spending less.  The days of runaway material consumerism, sport shopping, amassing goods not just buying, is over. You must adjust to this new attitude and reality. With unemployment in real figures being anywhere from 15-20%, this sector is not buying anything other then necessities. The next sector is working but earning far less, and spending less. The size of this sector is harder to determine but may be another 10-15%.

The next group of consumers live in fear, fear of becoming unemployed, cut back, or with reduced pay. There are the two job families where one lost their job thus impacting the entire families financial plan and habits.

There are the new entry’s into the market, recent college grads, still looking for their first job and not finding it. They are not spending either.

There will be no Back to School spike, there will be no significant Christmas spike, this is the way of the future…get used to it, plan for it, work with it, there is much you can do, but waiting for the customers to show up and spend with a drunken furor as in the past, with a commitment to ’shop till they drop’ is fatal.

Get over it. Those days are over.

Plan accordingly, be prepared, make the necessary changes required by such projections…or perish waiting for the hordes to rush into your store waiving their credit cards and filling their carts, as in the past. They are not coming.

 

“I do not have the time to do what I need to do, I am to busy doing less important tasks”

I have come to the conclusion that the most widely used over rated excuse to fail is ” I do not have the time to…..” We all do this, some more then others but we are all guilty of postponing important tasks in exchange for doing less important tasks, because we do not have the time…What a silly concept, yet oh how true.

So we never get to implement that  new marketing program, or we never get to design that training program or we do not have time to train, we do not have time to locate better vendors, can’t make that call to a new broker, no time to renegotiate a new lease with my landlord, can’t write a new business plan, no time, can’t, can’t, can’t, the second worst word in the English language, actually make that the first worst word.  It is the universal excuse for failing to do your job as best you can.

So what is the deal with this, why would we all put ourselves in harms way with such a lame excuse?

Human nature? Maybe, lets look at how we can end run this issue.

Here is what I do know. We are all more comfortable doing what we know how to do rather then forcing ourselves into new territory to do what is not as familiar. Ok so as long as we are busy doing what appears to be working, we can excuse ourselves from taking the next step to success as we have no time, we are busy doing the same thing we do every day, and getting the same results, no forward progress.

Here is the secret to eliminating this tired and worn out excuse.

Force he conclusion. Commit to not ding what you always do on Friday of every week. Simply put down your pencil, rip up your schedule, shut your door, put the phone on private and give yourself a whole day to do something you want to do but have no time to do it in.

Sacrifice, foregoing something that is pressing for something that has more value. Stop doing what ever it is you would have done, sacrifice, and do something that has more value…. this Friday.

In this one day you will do more new groundbreaking work then you can possibly imagine and the important  little secret you will discover is it made no difference what so ever if you took one day off from doing what you always do, fighting the same old battles over and over.

Do this and you will have the time to really solve some problems, create new opportunities, launch a new initiative, do whatever it takes to get you to where ever you need to go.

The amazing fact is, the time you take off from fighting your normal battles, will not be missed and will cause no interruptions in your business, and the time you allocate to new activity will bring huge dividends and results.

This one principal is strong enough to change your destiny, if only we had enough time to implement it!!!

Do it, see what happens, you will be amazed.

We do have enough time to explore the horizon, this Friday.

 

Use your resources, equipment, employees, facility, as much as possible!

I often remark to myself when I see idle resources, how much that must be costing the owner. For example I always see heavy equipment sitting idly on a job site, waiting for the right moment to spring into action as they sit sometimes for weeks. Can you imagine the debt service and ancillary costs associated with expensive piece of equipment? Yet it remains still much of its life, wasting money.

Restaurants that close on Monday’s. Figure it out, there is always a way to cross train and stay open and still give employees a day off. Capture the market, do not let them go elsewhere because you are closed! Not in this day and age of reduced revenues ans increasing costs. Use your resources as much as possible.

My wife and I visit a Sunday tag sale, occasionally, with hundreds of tables or booths, and at noon or earlier with hundreds of people  still walking around and still buying, the dealers begin to pack up and leave. Why, I ask in disbelief, would they possibly be leaving before its over…AT NOON, WITH HUNDRED’S OF PEOPLE WALKING AROUND? WHY? I ASK.  I do not get this. Use your resources as much as possible.

Same with trade shows, on the last day everyone is packing up as early as can be. I have displayed at dozens of trade shows in many industries and I have always made it a point to stay in full display until the last possible minute on the last day as I watch everyone else breakdown and leave as early as they can Over the years I have always, always pulled in a big deal or  made a great contact or something special happens in the last few hours of the last day with the person always commenting about our commitment to doing business while everyone else is more interested in going home.

Full utilization of your resources, that is the objective. You have already covered the overhead cost, get the most out of what you have. Produce profitable revenue, use your resources as much as possible.

Service industry wanting to sell people who normally work during the week, should understand that much of their market also works normal working hours thus they need to be open different hours to accommodate the market requirements, and to maximize the use of the resources.

How about ten hours shifts per day for four days and a skeleton shift the remaining three days…greater productivity, no overtime. Use your resources as much as possible, the overhead is the same but spread it out over greater productivity and the profits go up up up.

Be open on Saturdays, evenings and holidays…why not? Train someone to do the job.

Open your facility as many hours as you can, figure out how to get the market there.

Use your resources as much as possible. This is no time to waste any opportunity. Midnight sales, early morning hours, whatever it takes to squeeze one more dollar out of idle time, do it.

 

New financing contingency protection when purchasing real estate!

The mortgage industry is massively upside down. Too many defaulting loans, far to many borrowers unprepared to support the loans they took out, and changing economic conditions causing massive default and failure from both qualified and unqualified borrowers.

Yet there are many who still want to and can buy real estate in today’s market.

The problem is that in today’s mortgage market, the rules, terms and conditions can change every hour, day, or week.

In fact we are seeing mortgage commitments being written that have enormous contingencies, and huge opportunities for the lender to kill the deal and not fund, even at the last moment even at the closing table.

Therefore it is now important  for anyone considering purchasing real estate to consider protecting your deposit money right up to the actual disbursement of funds.

Included would be failure of the lender to fund FOR ANY REASON AT ALL RIGHT UP TO THE CLOSING.

Do this, the world is changing and borrowing is very difficult. One cannot afford to lose a downpayment because the lender pulls out at the last moment…and it happens every day.

 

SBA Offers in Compromise: The rules are changing for debt forgiveness!

It used to be that it would take about  year to get a return response from the SBA after an offer in compromise was submitted. The response would come directly from the SBA,  via letter, either a rejection, or a counter proposal, or an acceptance. You would never be allowed to talk  directly with a decision maker but you could attempt to negotiate through an intermediary message carrier. It worked a little although very time consuming and  very cumbersome.

Now the SBA is relying far more heavily on the participating lending bank to handle most of the burden and certainly all of the contact with the borrower. This is working out better.

Recently, we have observed the return time from when an offer is submitted is down to 3-4 months and in some instances much much less, weeks even, and we actually get to discuss and negotiate with the lending banker a resolution which if he/she supports has a very good chance of being accepted.

The banker negotiates what he/she believes is an acceptable deal and then it is submitted and the SBA fairly quickly responds back to the banker who then relays the response back to us.

While this may sound even more cumbersome, it is far better as we are really able to negotiate with the banker and his agreement is now very important ankoutd now seemingly almost always the  final result. The SBA is now heavily swayed by the banks decision and almost always accepts it with few exceptions.

Unfortunately we have also seen some abuse here, as the banker is now the point man in the process, and we have experienced him changing the deal when he presented it to through SBA or perhaps the SBA moved the banker to change the deal, but we are seeing accepted deals being twisted and changed upon return from the SBA at the hands of the banker who just ‘did as he chose’ changing the deal he agreed to as he saw fit. However we still get to negotiate although then on the bankers terms not ours…So be it, it is still working far better, if not perfect.

The fact is we are getting it done faster and far more effectively, recently getting a $354,000 defaulted loan reduced to a $12,000 payoff. Nice. The facts supported this conclusion and we were able to demonstrate this to the banker adequately for him to support the offer to compromise, which he did.

Call us for help: Call Norm at 413-584-2581. He will arrange a no obligation tele-conference for us to discuss your options and a strategy that will work.

 

6459 business close in Connecticut during the first 6 months of 2009! Debt workout would have saved many.

Just guessing but this could mean as many as 15,000- 25,000 jobs, 25,000 families about to go into a meltdown.

Some businesses closed because revenues were down and overhead, payroll, debt service, etc could not be supported. Many closed because the buying attitude and habits of our market places are changing, people are spending less, demanding good deals and deciding what they need vs. what they want. Even if wealthy, are spending less and spending more in. Business must either meet this challenge head on and eliminate its debt, making he necessary changes or close.

Many were forced shut by the secured lenders as they opt to foreclose and liquidate collateral.

If only they called us, as we understand the requirements of a downturn.

We are experts in debt workouts with secured banks and SBA guaranteed loans in default.

We preserve business assets, protect homes and wipe out debt. Magic you say! Could not be true you believe! What choice do you have? 6459 decided to close and did not call us. They have no choice now, they are in deep trouble as they still owe the debt through their personal guaranties but no longer have the business to provide the cash.

Those who are calling us are experiencing the relief they need to survive and yes prosper in this down economy. What would your business look like without debt? If the answer is above break even, profitable, then call us we can help you survive and prosper.

Those that did not call us are out of business and in trouble. It causes me great pain to know he enormous suffering the closing of a business causes to families, children and other businesses supplying them with goods and services. The ripple effect is huge. The cost enormous, and all avoidable.

Call us we can help. 413-549-2581, Norm will arrange a no obligation tele-conference for us to discus your options. Do it.

 

What is really happening with our economy…these experts offer you their opinion.

This is a very challenging time for projecting financial and economic trends. In a word, we are on uncharted ground and breaking the rules daily, performing  unprecedented strategies,  with the government attempting to intercede and fix the economy with its fiscal policies and actions.  Whew, if only they knew what they were doing, which it seems apparent they do not, but onward they go through the fog, pretending they know what they are doing, when in all reality they have not a clue. Yet onward our government treads, unable to resist satisfying their self determined need to interfere, control and thus fix the economy.

A healthy economy is vital to our way of life. Therefore we are all  very interested in what it all means and what is going to happen in the future. Fortunately there are many economic experts blogging their thoughts and ideas and engaging in discussion with their readers. I will list some of the more popular writers and encourage you to find out more from the experts, not the government, but others qualified to evaluate and interpret as well as project.

Here they are, selected by a recent Wall Street Journal review:

1. Calculated Risk  www.calculatedriskblog.com     Some of the most informative charts on the housing crisis, predicted the problem years in advance, The best blog for discussion on housing.

2. Krugman.blogs.nytimes.com  strident criticism of the GOP this Nobel prize winning Princeton University economist  has a talent for spotting economic problems as they emerge.

3. economistsview.typepad.com some of the most interesting views of the day.

4. delong.typepad.com  University of California professor, an accomplished economic historian.

5. gregmankiw.blogspot.com   a conservative perspective, from Harvard…

6. www.marginalrevolution.com   Tyler Cohen and Alex Taborrok libertarian economists at George Mason University write a wide ranging blog about what’s happening with the economy.

7. baselinescenario.com  Simon Johnson, International Monetary Fund Chief economist, now at MIT. a wide variety of discussions on all aspects of the economy.

8. economistmom.com  Diane Lim Rogers, a retired mother of four who worked in Washington policy circles for 16 years and now ads her view.

9. www.econbrowser.com James Hamilton, University of California writes about energy markets and other topics, readable and understandable.

10. blogs.wsj.com/economics…Wall Street Journal team..Justin Lahart, Phil Izzo, Kelly Evans, Sara Murray, Conor Dougherty and Sudep Reddy…the WSJ team of economists, claim to be he best in the business…they are pretty good. Read and decide.

 

Logo Graphics….reasonably priced, great results.

Image is important. Marketing begins with your name and logo.

Your logo says much about you and your business. This is a tricky area to navigate successfully as graphic artists can be very expensive and you never know what you are going to get. Unfortunately as happens most often you get what you pay for and if you go for low priced graphics in your local community, chances are you will get inadequate results, as yes most often you do get what you pay for…

So often times the small business owner opts for no graphics, computer generated word graphics for the logo of your business. Not inspiring, no marketing appeal, no upbeat message, no message at all other then you either did not bother, could not afford it, or did not even think of it. All poor results.

There is a way to accomplish the goals with outstanding graphics yet not break the bank.

Recently the Wall Street Journal explored this area and tested four national logo design companies which work off the internet and through telephone, providing quick turnaround services and deliver high quality results.

The companies were: The LogoCompany.net; with packages ranging from $149.-$289.

LogoDesignCreation.com;  with packages ranging from $39.-$152.

LogoDesignGuru.com; with packages ranging from 499. -$1,499.

LogoLoft.com; with packages ranging from $99. -$999.

All four were given the same company name and all four of course submitted four different concepts. All were professionally done and worthy of consideration. All looked as though allot of money was spent. All were good enough to use. It is difficult to pick the best as this is very subjective, according to ones personal taste.

The conclusion being that with quick turnaround and great results, this is an excellent way to go.

There is no need to not have a quality image and an excellent logo.Here are four companies that provide such solutions. Call them, try them out, be happy. Its a win. One more problem off your plate with a great result, affordable and quick turnaround.

I recommend this approach.

 

Success is based on disciplines practiced daily.

Its true. We may not want to believe it, thinking we all are wild and crazy entrepreneurs with great insight, instinct and vision, capable of seeing into the future and carrying your business to success with energy, commitment and your belief in your mission…but it just ain’t so.

Success in anything is built on a foundation of disciplines. Actions that are repeated on time and developed until mastered and then practiced indefinitely.

Collecting receivables, paying payables  ordering materials, first in first out, or whatever your system is and your discipline requires.

Prospecting for new clients, servicing established clients, training, advertising,  production, servicing complaints, everything everything everything can be reduced to a system controlled by disciplines that result in a cohesive force reaching goals in an organized predictable manner.

A simple example…if you establish a strategy, a system to collect receivables and it consists of calling on the 27th day to remind the client and make certain there are no problems you can solve preventing payment and then getting assurances you will be paid, and if you repeat this every invoice, in a few months your clients will be trained to pay on time. You practiced a discipline without question or variation and succeeded in supporting important action from your clients.  in fact you may even master this discipline which means you are performing with excellence.

Paying attention is the most important discipline a business man can acquire. By paying attention to what we do, what we say we are going to do we can learn much and perform much more effectively. Practice paying attention, it is a discipline.

Paying attention requires us to detach our egos so we can be honest and accurate. Performing disciplines helps us achieve this goal. Start with simple disciplines and after 60-90 days of repeating it, you may become good at it and then can continue with less burden if you pay attention and do not allow your ego to interfere telling you that you no longer have to do this.

Succeeding at small disciplines leads to success with larger more difficult more important disciplines. It is a powerful path that will result in your achieving your goals and becoming successful. It begins and ends with disciplines designed to support your reaching your goals, if only you pay attention to it and do it.

 

Minimum wages up to $7.25, July 24. If that hurts, don’t worry, you won’t survive anyways.

The recession or downturn or meltdown, whatever you want to call it has been with us long enough for us to deduce a few basic observations and then to strategize accordingly. ‘The times they are a changin’, (Bob Dylan), and we must change too…or be left behind.

So here is the deal: Most of the small business owners I speak with are all suffering from declining revenues.From 15% to 60% loss of revenue. Impossible to deal with they say, but not so,  of course it can be dealt with, here is the recipe;

1. Downsize greater then you believe you need too.

2. Increase productivity with incentives, team org,  training, reviews, etc.

3.Workout debt, eliminate or drastically reduce.

4. Manage with a key indicator system.

5. Emphasize quality and the highest customer service

6. Be the most of something.

7. Force profitability with a pencil and eraser and then implement.

Failure to follow the above requirements renders you unprofitable and losing money and it will be just a matter of time before you are out of business, so what difference does it make if the minimum wage goes up ? No effect whatsoever. The real issue as every business owner must force profitability by practising the above strategies.

We can no longer rely on an ever growing   economy with  compulsive spending. supported by easy credit.

Now, small business owners must learn to make a bigger profit on lower gross  volume with increased expenses and costs of production, by doing their job more efficiently and effectively and thus yielding more out of less. That’s the path, that’s the answer in a declining economy.

Get smaller…get better….or perish. No room for sloppiness, ineptness, guesswork, lack of effective management. Only the good business managers will survive and many will expand again.

Which one are you? If the increase in minimum wages effects you, you are already in enough trouble. You are unlikely to survive much longer anyways, so don’t worry, it will all be over soon.

If you are losing money or even breaking even, if you are not taking a pay check, if you have no retained earnings, re-evaluate your management style and make the changes required to force and sustain profitable business. If it cannot perform adequately shut it down and re-apply the capital elsewhere.

For those who have made the downsize transition and tightened up their bsiness practises, systems and strategies, nice work…good job. Enjoy your success.

 

Ok, your small business has ended and you have to get a job, how do you do that?

Its called invent your position. Do not just  take what is available and apply as if the job

Consider all your unique and valuable skills, they are enormously rare, focused and appropriate to a handful of business you either competed with, bought from and represented, or sold to. That is your target.Where ever they may be located. Even if you must relocate or travel.

You know strategies and information that few can duplicate that some of your buyers, clients and competitors would value quite highly.

Even if it is clear that your tenure would not be what we consider long term, even if it is unlikely you will be on a career path within the company, although it is quite possible. But you could create such significant value that there may be a place for you designing and implementing a  new developmental department only you could accomplish which you may want to stay with indefinitely. Senior sales manager, long term planning and growth,  vertical or horizontal expansion, mergers and acquisitions, whatever and wherever your skills allow you to add intrinsic value to your targets position, that is what you sell  and that is where you may work.

Its called turning your perceived disadvantages into a real advantage. Creating an entrepreneurial opportunity within a target company satisfying both you and your employer. You can create a compensation package based on the success of your program and be prepared to enter into non competes, non circumvention and non disclosure agreements, after all you are an entrepreneur.

What does this look like? Determine what your target company wants or needs, and then see how your skills and experience can deliver that objective. If you find a match, want to do it, and agree on terms and conditions that are favorable…sell the entire package. If not move on to another ‘buyer’.

Value added job creation, based on keenly developed skills and capabilities. Agree to a base pay and significant rewards for successful implementation. However be certain you clearly describe the results you intend to deliver, make them measurable, and the rewards you will receive based on success…make these measurable also. Put it into writing, have a thirty day ending clause, canceling all obligations not yet earned and off you go.

It is difficult to get a job in the normal meaning of the word,  as competition is younger, highly educated and cheaper…a tough package to compete with if you are an entreprenmeur. You come with too much baggage. But if you create a new situation to plug into,  one no one could possibly compete with because of your unique experience and skills, you may just create the job you want designed by you just for you.

Think about it, and then try it out by doing it. Target your focus and land a relationship.

 

Does your business have the ‘most of something’? If not, get there. Now.

The days are gone that you can win with a middle of the road position. With the internet marketing everything possible, with competition presenting a furious challenge in most business environments, with consumes wanting high quality, and a good deal and no longer just spending to spend,  being the ‘most of something’ is an important marketing strategy in today’s market.  You must have a definable identity that stands for some position that is best in the market area to successfully compete and win. Adjust your marketing message to encompass this focus point. Invent something, change something, but make it happen. Any business can accomodate this principle if you evaluate your options carefully, be creative, daring, and invest if necessary, this strategy is cost efficient and powerful.

For example, being the lowest price,  having the most inventory, having the most European styles, having the best financing terms, most unusual selection, quickest delivery time, best guaranty, most locally made, most American made, best presentation, most fun presentation, best web site,  greatest size range, most unusual answer to a problem, most hours open, most days open, voted best,  best sales people, whatever your ‘thing’ may be, be the best or the most at something and promote your position, sell your strength, demonstrate why you are different and offer more then your competition, explain what the advantages are in shopping at your business.

Do something unique and own it, promote it, and you get to ride the wave if you hit the nail on the head.

Create and utilize a competitive advantage.

It is mandatory.

 

What should you pay your employees and yourself?

I have been asked this question frequently this past week so I shall provide some insight.

It is a huge balancing act that requires  a clear understanding of your numbers, gross revenue,  profitability, overhead, cost of goods, and yes your currrent payroll.

Your numbers provide the answer and it cannot be determined without information.

I say this for two reasons. Most businesses tend to add payroll over time either from raises , overtime, or simply having too many employees and too low productivity from them it break the bank casing loss of profitability and possible downturn.

In fact I would love to answer the question by saying all payroll, employees and executives, should be determined as a direct function of productivity and profitability. This is the only real way to keep the equation in balance all the time automatically, it keeps everyone at the highest possible productivity level and always provides a profitable bottom line for the company and thus assures continuity and long term employment, as well as an owners draw.

Pay the employees too much and take too much and the business crashes. What typically happens is, as the payroll goes out of balance in relationship to revenue and profitability, the owners take no pay check to balance the equation while the employees absorb their normal pay. If productivity is low and profit non existent, the owners make it up by  not taking a paycheck, pretending this is an acceptable adjustment…Not so.

However leaving incentive based reward systems to another post, the classic equation for a business owner to start with is: one third  of the revenue allocated to cost of goods, one third allocated to fixed overhead, one third to gross profitability. In the end if there remains a 10% net profit, the business is healthy.

I find that the payroll should exist somewhere between 25-33% of revenue, a wide swing depending upon the type of business you have. However this still requires the gross revenue and inherent profitability to be in line or nothing works out well at all.

As for compensating  the owners or executives, the benchmark is industry standards for a business of similar size in the same industry. However this too must be controlled by the profitability  and gross revenue of the business.

In short if the owner takes a reasonable check based on comparatives, and has a remaining profit for the business of 10%, then all is IN BALANCE. The real quetion is and always will be the productivity of the employee base and therefor the  profitability of the company, the funds from where payroll is drawn.

Figure these numbers out first, and then determine the number of employees you carry so the payroll fits int a profitable equation with a ten percent net profit at the end and with the owner taking a reasonable pay check and you have the deal. To accomplish this you may have to add incentives to increase productivity, remove overtime completely and train effectively, making certain the employees have a clear understanding as to what is expected and how they are doing.

In the end if gross revenue is down, and the employee cost is not adjusted, nothing will work and downsizing is in order. Alternatively increase revenue by more effective marketing and sales development. This is what I mean by balancing the equation.

All the guidelines in the world are meaningless unless you take the entire equation into consideration. Payroll must be a direct function of gross revenue, profitability and productivity. The task is to force your payroll figures into this equation not the other way around which is a typical mistake. Its not how much payroll you should have, its how much payroll the business equation can afford, this number is a direct function of your overall productivity,  profitability and gross revenue and this must be computed first before you can determine how much you have available for payroll and then make it happen. If the numbers do not work, you must increase productivity with incentives and training, decrease payroll or make other basic changes to balance the numbers.

 

Yes we now do debt forgiveness workouts for credit cards as well as secured bank debt.

We have attempted to work through existing credit card workout companies of  which the are many. We have interviewed many, searching for the best the best of the group. But it simply did not work out for a number of reasons, including the  following:

1. They seemed willing to settle for less then the best potential result…not our style.

2. The deal was to expensive.

3. Their approach was not ‘professional’ enough to meet our standards.

Because our fundamental mission is the workout of secured bank debt and IRS issues, the tough issues, we have developed a very thorough financial reporting format which supports our strategy for debt reduction. We found that few credit cards rehab companies did little more then just beg, or demand but seldom provided relevant and important information for the credit card reps to respond to and support their accepting a deep discount.

Thus we accept the reality that there was not a viable option available to subcontract this matter, so we designed our own program and have hired our new credit card workout manager…Adam Gleason.

We offer a very professional program which promises to provide the best results possible. We have implemented an on line tracking system so our clients can see our progress any time they chose via a dedicated and unique email account attached to our tracking system. We have a number of strategies to deflect the barrage of telephone calls that invade your home and business and our fees are reasonable and a direct function of the amount of debt we reduce NOT the amount of debt you have, as so many companies do.

We prefer to restrict our program to small business owners, commercial clients, whose businesses and personal guarantees we are working out and who have additional credit card debt, usually derived s a direct result of their business operation and lack of personal income. However we will consider other unique situations on a case by case basis. We are not interested in the ‘consumer market’ and focus on our commercial clients with secured debt issues as well.

If you fit this profile give us a call, Norm will arrange a tele-conference  with Adam to discuss your various issues and provide appropriate strategies and solutions to resolve the. Better yet, talk with one of our secured debt partners, get the whole deal. 413-582-2581

 

Enough with the insurance companies beating up the health care industry, this is what you do about it.

I have had some experience dealing with the health care industry, which depends upon insurance companies,medicare and medicaid  for financial support.

Many have gone out of business, many are not covering overhead and are trying to get out before they go bust. None that I have dealt with have been able to become successful because of the predatory billing and payment practices the insurance system utilizes.

Here is the deal:

1. They control how much you  earn and it is way too low.

2. They require copious paperwork and administration requiring extensive payroll to support, further eroding the profit margin which is almost non- existent .

3. They challenge invoices regularly and thus do not pay them or downsize the invoice to whatever they seem to choose to pay and it is always less then what the provider needs to make a fair profit.

The net result is the health care provider must either short change the client, or figure out how to beat the system to earn enough to stay in business. Not a good plan for something as important as health care. It is not sustainable while maintaining a quality service system.

This is our system now, and it stinks from a business overview. It fails for the health provider,  fails for the patient and only wins for the insurance company which from my perspective is being short sighted, as what is the point of a health care program that prevents appropriate implementation? No reason for this system to exist at all, as it fails on its fundamental mission, to provide reasonable quality health care for the client and to support a private system to deliver it.

So here is the cure…go private, forget insurance revenue, or Medicare and Medicaid, go private  and bill what your time, expertise and requirements are worth and provide high quality private services for those who can afford to pay.

Can you survive such a transition? Of course for the following reasons:

A. When you stop billing the insurance companies you will still have 90 -120 days of billing in the system coming out over the time period. This gives you the time you need to develop and implement a marketing program, to educate the market that quality care does exist if you are willing to pay, and many are. Besides, it does not have to be all or nothing, take one day and dedicate it to marketing efforts and then fill that day with private clients until the day is full and then take a second day until your business has transformed itself.

B. Design a content based comparative marketing program which educates the general population what the benefits are of your service, including the services you will provide that the insurance companies will not support or pay for, and the  time and effort  and expertise you will give your clients that the insurance companies also will not support.

You have at least a ninety to hundred and twenty days that you will still receive  fullmrevenue from the system, and can continue to bill on a declining basis as you make this transition, as described, to private pay.

Now market effectively with a web site, and definitely a blog to discuss your program and create a social network of followers, press releases and seminars, newsletters etc. to educate the market as to what you do and why your program is worth the client paying for it as opposed to accepting lesser service for lesser money.

It is already being done very successfully by the  Dental industry. When I make an appointment for the dentist and am told it will be 6 months, with them relying on private payment, I can only conclude this model will work if you dare to make the transition. Most dentistry service is not covered by insurance thus the industry at large is primarily privately funded and it works, it can work for any health care provider if you market effectively.

Do it or fail trying to cover your overhead and take a pay check while being supported by the insurance industry.

It’s not for everyone. Rethink your plan and make adjustments. Do not rely on the insurance companies or government programs, they do not pay, fight back, regain your independence, regain control of your business and life, go private.

 

A new SBA excuse not to settle with debt forgiveness, future potenial earning power….dangerous ground, they are getting desperate.

As we work with defaulted SBA guaranteed loans every day, filing dozens of Offers in Compromise, we have a broad base of experience in dealing with their issues and guidelines. I see new trends before others as we initiate many Offers. The latest silliness from the SBA is their most recent rejection citing future potential earning power, as the reason for rejection!

Apparently the SBA has a crystal ball that lets them know that a person will escape he downward trends of this economy and will recover and will experience greater earning capacity capable of paying off their loans in the future. Impressive, I would love to have a look at that  crystal ball..

Since most of the SBA guaranteed loans are based on small business applications, actually all, and a defaulted loan payback must result in a liquidation of the business assets, a requirement prior to making an Offer in Compromise, and since must of  the loans I see are for hundreds of thousands of dollars, even if the business owner does land a job, do they really believe they will be able to better service the SBA defaulted loan from a weekly paycheck? As if there will be an abundance of revenue left over each month to throw thousands at the payback requirements necessary to support a large loan or even small loan payback? As if there are jobs available at all?

I doubt it.

What happened to the SBA bench mark for evaluating Offers in Compromise, ‘the net liquidated value of the borrower at the time of application’? Gone? Forgotten?

So the bank and or the SBA simply waits for the borrower to recover, getting no payments at all until that glorious day when the borrower lands a  job and can then begin the payback? Is this really  how desperate the SBA is in finding reasons to refuse an Offer in Compromise? Is this truly a standard they will be exploiting, a reason to reject a perfectly viable Offer in Compromise to settle?

Fortunately I hear this only occasionally, but recently more frequently. We always figure out a  best path around such absurdness, but it is creative. Be careful when you begin to hear this, it is a problem. It prevents re-emergence and a second try, the presumed goals and objectives of the Offer in Compromise program.

It is an unworkable standard as there are no benchmarks, it is pure fantasy, yet apparently the SBA and its representative banks are indulging in exactly that…fantasy, as a reason ro reject an Offer.

 

SBA answer in an hour!!!! Fast Food service for debt forgiveness workouts!!!!

Yes it happened. An answer in an hour. It is hard to believe as we usually wait many months for other Offer in Compromises to surface and now all of a sudden we get a call back from the banker in an hour with an answer, it was a rejection, but it was an answer!

How did this happen? Some banks are so affiliated with the SBA they are granted the authority to accept or reject offers in compromise on behalf of the SBA. They email all the information to the SBA and they reviewed and sent back their agreement to the banks decision. This same bank took a few weeks on another loan, so this may be  trend.

Although we probably have a few dozen in the waiting line counting off the months as we wait to hear.

Cannot determine who has what powers but it is an interesting fact of this business, apparently some banks are so wired in they are in essence acting on behalf of the SBA. Hallelujah, a quick answer.

 

When entering into a debt forgiveness workout, you will probably be sued, with a judgement entered. So what.

Everyone gets so upset over law suits and judgments entered against you. I understand it is not a pleasant experience, but really folks what does it mean? It means you REEEEEEEEEEAAAAAAAALLLLLLY owe the bank the money, where before you only owed it to them…big difference ? No. Sure it may hurt your credit score a bit more, but chances are you are in need of a credit rehab program anyways and  the debt relief is worth a credit ding which can be worked out later.

The second point is the bank does not want the property just the judgment, and a workout can be negotiated after a judgment is entered, no problem. We do it all the time,

So why do the banks spend the money to get empty judgments that seemingly mean little to anyone?

1. Sometimes they result in surprise settlements of significant value. People panic and fold into the banks demands thinking the judgment means something very powerful. It’s amazing how that happens.

2. It is a natural reaction for the bank to protect its interests, get first in line and be ready to pounce should the opportunity ever make itself apparent. IT makes sense from a banks point of view but does not hinder the workout potential.

3. If there is to be a foreclosure, the law suit is fundamental and required, thus the bank is simply preparing the paperwork as they may  have to eventually liquidate the collateral by auction. Even though you may be talking settlement, the bank is getting ready if you fail. The bank does not want to waste any further time then it must based on the regulatory requirements of notice and response. Onward it churns.

4. Of course finally if the loan is an SBA guaranteed loan, then the bank must ‘exhaust its legal remedies to liquidate the collateral’, or risk losing the guaranty from the SBA. Thus they sue and go for the judgment full steam ahead.

Is it so bad for the borrower? Not really, it will be worked out just the same, its only value to the bank is  positioning and  for intimidation as well as it  being the banks strategy. This is what banks do. It is their only avenue of protection and action…so they do it.

The important point is it does not interfere with the opportunity to engage in a workout. In fact frequently since now we have the opportunity to deal with the bank counsel, it sometimes works out better as the banks attorney sometimes  recognizes a lost cause and often recommends a settlement that the bank has rejected.

Understand what is happening, have a counter plan, a workout strategy, in motion and all will work out. If you fail to do this your assets  will eventually  be liquidated.

Workouts are a tough road to take…but a necessary tool for any business man to consider when required. What option do you have? Debt can kill you faster then anything else.

 

“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 grant debt forgiveness and 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 debt forgiveness 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 with debt forgiveness.

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 your customers 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 only 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  with 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.