Tampa Bay, Fl
Opinion by: E. Eugene Webb PhD
Author: In Search of Robin, So You Want to Blog.
UPDATED
You may want to think twice about that SBA bail out loan. Check out Tampa Bay Times By Graham Brink: Fraud, bad actors are inevitable with $350 billion federal
loan program.
If you passed on
clicking that link go back and click it right now and read the whole article!!!
Graham Brink makes a
number of good points, but the key among them is the fact that the federal
government is not going to investigate these loans. They will incentivize
outside lawyers and others to do the work for percentage of recovery or a fixed
fee. And you can bet the media print and electronic will be all over this one.
What that means is an
army of people will be looking at every PPP loan large or small for any hint of
fraud or even accidental misuse of the funds.
Don’t think for a minute
you can skate because you are mom and pop operation with a couple of employees.
You are the one they are
looking for.
The big guys have a gang
of lawyers to get them off. You don’t.
Don’t look to your
banker to keep you out of trouble. When was the last time you saw a banker take
responsibility for anything?
If you decide to play
some games with any of this money, you could be in very serious trouble.
As Brink points out,
even accidental misuse may not get you off, because in this case stupid will
not be an excuse.
This second round of loans
will be similar to the first, with probably a little more attention paid to who
gets how much and with an emphasis on getting money smaller businesses. Don’t
get all teary eyed, this is serious business.
If you take the money
and misuse it the loan will be recalled in full and there may be interest and criminal
penalties depending on the circumstances.
If you are going to play
in this game, ignore everything the banker tells you, get a good lawyer and/or
a CPA and document every penny of this money.
It would be good idea to
ask banker/lender him/her for a letter on the lending institution letterhead that
states this loan (reference loan number) is one of those PPP forgivable loans.
If your banker/lender won’t do that I would a) RUN and b) report them to the
SBA.
Here is another chilling
thought.
Every one of your
employees will be watching where the money goes. My guess is whistle blowers
will be encouraged and well compensated.
That thought alone
should keep you up at night.
For reference, the
original post follows.
For some insight check
out; New York Times, by Stacy Cowley and Emily Flitter: Frenzy and Desperation as Small Businesses
Grab for Government Aid
From the Intelligencer,
by Eric Levitz: The Small-Business Loan Program Is Already Hitting 4 Big Snags
Levitz details four
major concerns the banks are having with the program:
1. For many banks, the
program looks high-risk, low-reward.
2. The bailout fund is
too damn small.
3. The most vulnerable
mom-and-pops will likely come away empty-handed.
4. A (well-intended)
last-minute rule change makes the program a worse deal for a lot of businesses.
It works like this. To
get cash into business owners’ hands fast: small-business owners would simply
walk into their friendly neighborhood bank branches; the banks would lend them
money quickly, and the government would make sure everyone was whole later.
Bankers as a group do
not like to be told what to do. Especially when it comes to lending.
If you’re a small
businessperson, you have probably had the experience of dealing with your
banker as he/she sits smugly behind a very expensive desk and looks at you with
distrust as you make your pitch for a loan.
Bankers are going to
tell the Borrower what they will do and being put in the position of moving
quickly and with limited time to get information about the borrower, they are
to say the least uncomfortable. There are very few requirements on issuing the
loan, and that takes away one of a bankers’ great glees in life, which is the
opportunity to refuse your loan with that I am better than you grin on their
face.
Since these loans only
pay the bank one percent (1%), they are not going to be falling all over
themselves to make the loans happen.
Before you go screaming
down the road breaking every speed limit in town to get to the bank, stop and
think about the old adage: If something seems to be too good to be true, it
probably is.
You might also want to
look at this article from the U.S. Small Business Administration: What Your
Lender Wants You to Know about Applying for an SBA Guaranteed Loan.
Remember the line from
above: Bankers as a group do not like to be told what to do.
On television, in
interviews they are all smiles and grins about this program, but my guess just
under the surface they are about as pissed off as they have been in a while.
So, borrower beware…..
This is very defined
program with very specific guidelines, and your banker may try to steer you
into a different loan, a non SBA loan or one that looks like or sounds like the
SBA Guaranteed Loan program but is not.
Check out the link
above, make sure the paperwork clearly states you are applying for and
receiving a loan from the SBA Guaranteed Loan program. If you have an attorney,
it would be a good idea to have them look over the Loan Application to make sure
everything is on the up and up.
You don’t want to end up
with a $100,000 loan that in a few months when the loan forgiveness program
kicks in your “friendly” banker has the gleeful opportunity to tell you YOUR
loan was not one of THOSE loans.
You may be desperate for
the money but do your homework. I am sure there are a lot of banks and bankers
out there that genuinely want to help and will play by the rules. I am equally
sure that banks, all of them, put their interests ahead of yours.
This is a business deal,
not a chest bump be careful.
E-mail Doc at mail to: dr.gwebb@yahoo.com or send me a Facebook (E. Eugene Webb)
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