Tough Times Call for Asking Questions of the Right People
I saw an article in today's NY Times Blog. I couldn't resist replying...even though I don't live in New York. Senator Frank Lautenberg (D) of New Jersey is making the rounds and asking small business owners what their needs are and if they are aware of all the services that the Small Business Administration provides.
They are listening to business owners tell about issues regarding the lack of financing....specifically SBA loans. This is a good start and there needs to be more of this by our elected officials. And they need to keep digging deeper. Here's the comment I sent to the Senator today.
"I am glad that you are attempting to get to the bottom of the small business credit crisis. I am a Business Intermediary - I work with business owners to buy, sell, grow and finance their businesses. And I am quite familiar with SBA loans and bankers (having been one myself for over 20 years and a graduate of Pacific Coast Banking School). Here is my opinion on what is happening regarding SBA loans.
In my opinion, SBA loans aren’t being made because the banks are under extreme scrutiny by the Federal Regulators to keep a clean loan portfolio and cut down their risk.
Even though the federal government has “allocated funds” for SBA guarantees…..this is not necessarily real money. It is merely an allocation of the amount the government is willing to risk if SBA loans default. Even with SBA guarantees, banks are still taking a risk on the unguaranteed portion of the loan.
The commercial bank has to agree to make the loan using the banks rules which are superimposed over that of the SBA rules. Just because SBA may be willing to guarantee the loan, the bank may not necessarily want to make the loan.
When I was a commercial banker, I underwrote and approved many commercial and SBA loans. Each bank has a loan policy which varies depending upon management’s tolerance for risk and their understanding of a particular industry or loan type.
Additionally, a bank’s risk tolerance is governed by how hard the bank regulators squeeze them about their current loan portfolio. And finally, there are just some banks that just won’t make an SBA loan. They don’t know how, don’t want to learn, and it won’t matter how much the government allocates for the SBA guarantees.
If the bank does make the SBA loan, the package has to be done perfectly or the bank risks not being able to exercise the government guarantee. That’s one reason why SBA loans take so long and require mountains of paperwork.
So what we have is a “stalemate” with one foot on the gas (the allocation of guarantee) and one foot on the brake (bank regulators). I don’t know what the ultimate answer is….but I do think that our elected officials need to talk with bankers about why they can’t and won’t make loans.
My suggestion to borrowers is: seek an SBA loan from a “Preferred Lender”. See the website http://www.sba.gov/ for a list of these lenders in the country. They have the training, knowledge and ability to make SBA loans. Also, I suggest that you start with smaller banks that have local decision-makers to make your pitch. But due the prior circumstances I mentioned, the bank still may not make the loan."
Hey, who knows if he'll even read my comment. But I feel better for having sent it. What have you done today to let someone know how you feel?
They are listening to business owners tell about issues regarding the lack of financing....specifically SBA loans. This is a good start and there needs to be more of this by our elected officials. And they need to keep digging deeper. Here's the comment I sent to the Senator today.
"I am glad that you are attempting to get to the bottom of the small business credit crisis. I am a Business Intermediary - I work with business owners to buy, sell, grow and finance their businesses. And I am quite familiar with SBA loans and bankers (having been one myself for over 20 years and a graduate of Pacific Coast Banking School). Here is my opinion on what is happening regarding SBA loans.
In my opinion, SBA loans aren’t being made because the banks are under extreme scrutiny by the Federal Regulators to keep a clean loan portfolio and cut down their risk.
Even though the federal government has “allocated funds” for SBA guarantees…..this is not necessarily real money. It is merely an allocation of the amount the government is willing to risk if SBA loans default. Even with SBA guarantees, banks are still taking a risk on the unguaranteed portion of the loan.
The commercial bank has to agree to make the loan using the banks rules which are superimposed over that of the SBA rules. Just because SBA may be willing to guarantee the loan, the bank may not necessarily want to make the loan.
When I was a commercial banker, I underwrote and approved many commercial and SBA loans. Each bank has a loan policy which varies depending upon management’s tolerance for risk and their understanding of a particular industry or loan type.
Additionally, a bank’s risk tolerance is governed by how hard the bank regulators squeeze them about their current loan portfolio. And finally, there are just some banks that just won’t make an SBA loan. They don’t know how, don’t want to learn, and it won’t matter how much the government allocates for the SBA guarantees.
If the bank does make the SBA loan, the package has to be done perfectly or the bank risks not being able to exercise the government guarantee. That’s one reason why SBA loans take so long and require mountains of paperwork.
So what we have is a “stalemate” with one foot on the gas (the allocation of guarantee) and one foot on the brake (bank regulators). I don’t know what the ultimate answer is….but I do think that our elected officials need to talk with bankers about why they can’t and won’t make loans.
My suggestion to borrowers is: seek an SBA loan from a “Preferred Lender”. See the website http://www.sba.gov/ for a list of these lenders in the country. They have the training, knowledge and ability to make SBA loans. Also, I suggest that you start with smaller banks that have local decision-makers to make your pitch. But due the prior circumstances I mentioned, the bank still may not make the loan."
Hey, who knows if he'll even read my comment. But I feel better for having sent it. What have you done today to let someone know how you feel?
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