Does the SBA Chief Really Know What It Will Take?
I know I've been on a "kick" lately making comments regarding banks and SBA loans. It's probably a curse of some sort since I was a banker for many years. I promise I'll write some stuff about buying and selling businesses too. It's just that getting financing is so KEY to putting a buy/sell transaction together.
If we don't figure out how to fix this and get credit flowing and businesses moving again, its going to worsen the situation.
Today, I saw a headline in the Wall Street Journal from an interview with Karen Mills, the SBA Chief. Here's my response to the article.
I strongly disagree with Ms. Mills when she says the "health care” is the number one concern of small business owners.
I work with small business owners that want to sell, buy and finance their businesses. I can tell you, the only reason health care comes up in the conversation is because business owners are terrified about what the Obama administration is attempting to do with health care in this country.
Adding a tax to pay for health care will cause many to go under or at least go “underground” by hiding their income. Imposing a “government option” to compete with the free market is a bad idea. Look at France and England. Their costs are out of control and people are not getting the care they need.
Some people say that British dogs have better health care than the humans do (Wall Street Journal article from 8/8/09). Why follow that model? Doesn’t make sense to me.
While I think that the changes to SBA (eliminating fees and increasing the guarantee) are extremely positive, doing just that is not going to make banks lend. The banks must make the loan and if the borrower should default is when the guarantee is called upon.
And what's more, the SBA loan package must be put together perfectly - i's dotted and t's crossed - or the SBA won't fulfill the guarantee. And the guarantee can only be called upon after the bank has liquidated the borrower's collateral and attempted to get payments.
So while improving the SBA program is great, it is not a panacea to solve small business owners’ problems. Someone needs to ask the banks why they aren’t able or willing to make the loans. Hint: its about federal regulators tightening the reins on their portfolios. There are many variables to the credit situation and fixing one thing will not cure it.
If we don't figure out how to fix this and get credit flowing and businesses moving again, its going to worsen the situation.
Today, I saw a headline in the Wall Street Journal from an interview with Karen Mills, the SBA Chief. Here's my response to the article.
I strongly disagree with Ms. Mills when she says the "health care” is the number one concern of small business owners.
I work with small business owners that want to sell, buy and finance their businesses. I can tell you, the only reason health care comes up in the conversation is because business owners are terrified about what the Obama administration is attempting to do with health care in this country.
Adding a tax to pay for health care will cause many to go under or at least go “underground” by hiding their income. Imposing a “government option” to compete with the free market is a bad idea. Look at France and England. Their costs are out of control and people are not getting the care they need.
Some people say that British dogs have better health care than the humans do (Wall Street Journal article from 8/8/09). Why follow that model? Doesn’t make sense to me.
While I think that the changes to SBA (eliminating fees and increasing the guarantee) are extremely positive, doing just that is not going to make banks lend. The banks must make the loan and if the borrower should default is when the guarantee is called upon.
And what's more, the SBA loan package must be put together perfectly - i's dotted and t's crossed - or the SBA won't fulfill the guarantee. And the guarantee can only be called upon after the bank has liquidated the borrower's collateral and attempted to get payments.
So while improving the SBA program is great, it is not a panacea to solve small business owners’ problems. Someone needs to ask the banks why they aren’t able or willing to make the loans. Hint: its about federal regulators tightening the reins on their portfolios. There are many variables to the credit situation and fixing one thing will not cure it.
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