Multi-Creative Entrepreneur: Producer and Juggler, both figuratively and literally. TV, Film and Radio Producer. Host of "DavidKamatoy.com Show" Entertainment, E-Marketing, Jugglemail.com CRM, Content Marketing, Musician, Tenor
With 2010 finally over, everyone seems to feel the need to look back over the year that was. Here at Kamatoy Media Group we are no different, and because of our strong connection with small businesses we decided to go to our own small business and SBA loan expert, Craig G. Francis, for his thoughts on this very busy year. We wanted to know what he thought about the year in business, politics, and the economy, and Craig was more than happy to oblige. In our first post we talked about the top small business stories on his list. Today we move on to the economy.
David Kamatoy: The economy, of course, was a major source of stories during 2010. I realize that many of those stories cross over into both small business and politics, but what three stories do you see as having the greatest impact this past year?
Craig G. Francis: If these responses provide small cheer there is reason for this. I have a 35-year perspective to draw from. If a budding entrepreneur thinks the waters are getting warmer because the stock market is up and SBA loans are increasing, they may be in for a shock. The statistics that point to rapid recovery are not here.
First of all, political will and economic quick fixes emanating from D.C. notwithstanding, the economy will take AT LEAST 5 years to absorb the excess population of unemployeds as well as provide jobs for the population growth in this country. This time line is realistic if we do not bankrupt the country with deficit spending. And if China does not stop buying our debt unless rates double or triple. The economy is driven by the consumers and they are not healthy despite the small orgy of Christmas 2010 spending. Aside from state and federal hiring, nothing will increase employment rates in short order.
Some of the stats that tell me we are at least 3 and possibly 5 years from recovery are as follows:
The Savings and loan failure of the mid 1980's cost the government about $150,000,000,000 in bailout funds
The economic recession of the early 1990's coupled with the failure of nearly 1,000 banks cost the government about $500,000,000,000 in bailout funds
This Great Recession is responsible for the collapse of Wall Street, the failure of over 300 banks to date and $4,000,000,000,000 in bailout funds spent to date.
Seems like the cost of bailing us out has increased by several orders of magnitude.
Second of all, the inventory of foreclosed homes, those with underwater loan-to-values and those whose owners will default this year, is at an unprecedented level. The clearing of inventory will require another 20-30% drop in prices as banks and consumers rid themselves of this residential dead weight. The consumer-driven economic boom from 1998 to 2006 stemmed from the 15% annual price rise in homes. This boom in prices made consumers feel wealthy and they spent that wealth. The subsequent contraction in home prices made consumers who still had jobs feel poorer, and that has crushed the economy. Approximately $15 trillion in personal and corporate net worth evaporated in the last 4 years. This is about 20% of the entire net worth of this country. Adios Dinero.
When the US Government is $14,000,000,000,000 (yes, trillion) in debt and climbing, while facing $200,000,000,000,000 in unfunded mandates of citizen expectations for Social security and medical care, we will not soon see a recovery to match our expectations of wealth created in the last 25 years. The governments, both state and federal, are vast sucking black holes of fiscal ineptitude and bureaucratic sloth inexorably bankrupting the country and its citizens. Sorry about the bad news Mrs Lincoln, but how was that play?
Finally, if you plan to start or build your business know this - in the last four rough patches from 1975 until 2006, it took about 2-3 years to recover. In this Depression it will take at least 6-8 years to recover. And that is only if we do not have some sort of economic retracement due to an unforeseen event. Proceed cautiously if starting your firm. Take care in growth plans. Be absolutely certain you do not start or outgrow your capital in uncertain times. Make sure your expansion capital is in place BEFORE you begin your business or expand operations. Do not expect ANY sort of bailout or helping hand from anyone, most particularly any government. They are broke and spend most of our tax dollars feeding Sponge Bob and the Mooch class.
Even if your personal optimism, the hallmark of all entrepreneurs, is at high level, it is easy to overlook the economic, regulatory and financial land mines that litter the field. Form alliances or confederations of like-minded people to make sure you have as much of the intelligence that will help you guide your business as possible. Get involved in local and regional politics and use the business owner resources and alliances you have forged to force changes at all levels of government.
David Kamatoy: In our last post we will talk with Craig G. Francis about politics in 2010 and what he sees ahead for 2011.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981 and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.
With 2010 finally over, everyone seems to feel the need to look back over the year that was. Here at Kamatoy Media Group we are no different, and because of our strong connection with small businesses we decided to go to our own small business and SBA loan expert, Craig G. Francis, for his thoughts on this very busy year. We wanted to know what he thought about the year in business, politics, and the economy, and Craig was more than happy to oblige. So today we begin a series of Q&A sessions with Craig G. Francis on the year that was and the year that is to be.
David Kamatoy: First, Craig, thank you for taking time at the beginning of the new year to talk to us.
Craig G. Francis: My pleasure, David.
David Kamatoy:To start off, Craig, what would you consider the top three small business stories from 2010, and why would you choose each of them?
Craig G. Francis: Well first, David, there was not a lot to cheer about in 2010. The economy, regulations and financial matters are still keeping small business down. The lack of consumer confidence is holding down business growth and profits. The state and federal governments are still running multi-trillion dollar deficits and we see more to come.
The business community is struggling to gain some traction in the minefield of uncertainty stemming from the lack of genuine concern for, and even active opposition to, the small business sector by the political elites. This is largely reflected in the jobs market. Unemployment is stalled at a high of 10% with another 7% who have given up. Small business creates jobs and retains them. So this measure of the businesses tells me that they are not healthy at this time.
Given these conditions, businesses can give a small cheer to the extension of lower taxes for individuals and small corporations. Even though the extension is only for 2 years, it allows the entrepreneurs to cope with one less problem and hope that the extensions will be made permanent by the new members of the Congress. This then may allow the business owners to make long-term plans and hire additional employees, while investing capital that has been sidelined during the first two uncertain years of the Obama Administration.
The second story is the slow opening of the lending spigots to the small business community. Coming from a complete lock down of capital of this lending sector in the latter part of 2008, banks are starting to provide the needed capital for growth to the entrepreneurs of this country. The SBA fee reductions and higher guaranties for small businesses, that segment that represents the greatest portion of job creation, has proven to be a great help to the banks’ comfort level in lending to the small business sector.
The third story is the great potential for repudiation of some of the worst sections of Obamacare and the executive decisions that are diametrically opposed to business health. This job-killing machine is being shown in all its destructive glory and even some of the most ardent fans of government health care are recoiling from this economic Hydra. These sorts of regulations could easily add 20% to the cost of employees, making our businesses unprofitable and even unable to compete on the international level.
David Kamatoy: In our next post we will talk with Craig G. Francis about his top economic stories of 2010 and where he sees things going in 2011.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.
For some weird reason I write these posts on getting colds and I get traffic so here's another one.
This is the second subtle cold within three months so here we go. Last year I got hit HARD the level of cold was BRUTAL. A day of heavy sneezing, a day of swollen throat and the effects lasted well past a month.
HOW PRODUCTIVE ARE YOU DURING COLDS?
This year both of these colds felt and feel almost like allergy attacks but I know they are not. I would like to believe that my improved diet of less high fructose corn syrup, less dairy and less wheat contributed to my less intense symptoms. It is clear however that the absence of mucus causing stuff has been a good thing for me.
The first cold started with a sore throat. This current one started with sneezing. Both are going through a subtle cold cycle.
However WORKING THROUGH A COLD I find that you have to surrender a bit to the inactivity and lack of sharpness in order to embrace the moments of activity, like the one thats allowing me to write now.
I found that during the initial COLD SYMPTOM HIT I felt quite out of it no matter how much I tried it took me quite a long time to do anything. So I watched some stuff online with a sporadic task. That and I was still in DENIAL over having a cold so I kept fighting the feeling.
I this second day I found myself doing some physical tasks slowly but not any higher functions until this evening.
WHAT KIND OF TASK CAN YOU ACCOMPLISH AND WHAT DO YOU HAVE TO LEAVE ON THE TABLE?
ZINC WORKS- While have read and written about the research of ZINC, and it looks good if you start it right away.
WHAT EAT AND DON'T EAT-What I focus on now more is what not to eat. I try to eat as healthy as possible with no mucus causing CRAP. This now includes again less wheat, dairy, and sugar.
For instance today I had a banana, a nutrition bar, chicken, rice, salmon, potato, etc.
WHAT I TAKE-I know some people don't like to take meds but I DO lol. 12 hour Decongestant, Ibuprofen, Sugar Free Cough Drops.
On a more alternative note I do Emergenc-C, Netti Pot and I normally do a b-12/energy type thing in general. Currently taking NRG, Diet Rockstar, 5 hour.
I also suggest finding a way to stretch, find a way to relax and breathe deeply at times. Warm Compress on the sinus etc.
Colds have a tendency to tighten up muscle groups with all the sneezing and coughing. I realized this last go round that a lot of my STIFFNESS post cold is coming from inactivity vs. symptoms.
I'm sure we all have our COLD REGIMENS and again on a final note this is what I do. It is not necessarily a recommendation as I am not a doctor lol.
Let me know how you've gotten smarter or dumber with the way you treat your colds.
DAY 2 of this cold and I guess BLOGGING is now part of my formula.
San Diego,CA- There is an overwhelming belief that people in Southern California do not know how to drive in the rain. This guy actually did nothing wrong he just hydroplaned and luckily did not get hurt.
A few of us stopped to make sure that he was ok. My original thought was, "Wow!" then I realized the drive train was still running so I stopped.
We are constantly amazed that when it starts to rain in people. Some drivers drive HAUL ASS.
We live in a region where it rarely rains so when it first rains the oil in the pavement comes to the top.
OIL AND WATER DO NOT MIX
So just a Southern CA tip, when it starts to rain slow down. I try not to drive during those first hours for this exact reason.
AGAIN THIS GUYS WAS DRIVING NORMALLY AND I THINK MANY OF US STOPPED BECAUSE IT COULD HAVE BEEN ANY ONE OF US.
Some say this has taken way too long but the reality is that it's here. What this means from an entrepreneurial standpoint is that this is the uptick weve been waiting for in the private sector.
Some opponents say the TARP Jr. means that banks will make risky loans but the reality is that SBA loans still need great credit and equity. So with great risk comes great reward.
Middle Class Entrepreneurs are the ones that can take the most advantage of these loans and by doing so create jobs. If you have the credit and equity to buy a business, expand or purchase a building.
If you are an entrepreneurial investor its time to look for projects that can benefit from an alliance.
If you are a jobber then look for the expansion or new businesses and walk in and say that you want to be a part of making the business work.
THIS IS THE WIN WIN WIN weve been looking for and in the next few months and years the actual unemployment will now decrease.
CHECK OUT CRAIGGFRANCIS.COM, our client if you are interested in accessing an SBA opportunity. We are working on a new interview with him to get his first spin on the signing of the SBA Stimulus.
San Diego, CA- Mark Christopher Lawrence aka Big Mike on NBC's Hit Show CHUCK is hosting a night of comedy. Sept. 21 2010 7p.m. at Cygnet Theatre in Old Town.
Line Up Includes...
Kevin Johnson, Ventriloquist from Americas Got Talent is headlining. Frances Dilorinzo, Last Comic Standing and David Kamatoy the #1 Filipino American Juggling Comedian take up the slack.
So this show should just ROCK! Mark has been able to create sold out houses for North Coast Rep and so we know we can do the same in Old Town. We hope you can make the FUNNY because it's going to be a BLAST.
New Video! East Village Tavern & Bowl with Dan Hurd, Craig G. Francis
San Diego,CA - David Kamatoy sits down with Dan Hurd, co-founder of the East Village Tavern & Bowl, to talk about the success of the business and how this successful tavern, sports bar, and bowling alley was funded by an SBA-guaranteed loan. The Tavern is the opposite of a traditional bowling alley in that it's a tavern/sports bar first and a bowling alley second. The video also includes footage of lines coming out of the door on a fight night, the venue packed on a game day, and interviews with patrons and staff.
"The idea behind SBA Loans can be somewhat flat out of context. We decided to profile a dynamic successful business so that entrepreneurs can see what's possible within the context of the SBA Loan program, hopefully find some inspiration. The East Village Tavern & Bowl is a great example of how a good idea can come together with team, credit, property, and align with an SBA Loan." -David Kamatoy, Blog This with David Kamatoy
The East Village Tavern & Bowl has become part of the landscape in downtown San Diego, expanding the size of the bowling alley in order to accommodate the growing patronage. Just recently, at the end of 2009, the owners opened their newest location in Chula Vista, CA, East Lake Tavern and Bowl. This growing, unique brand contributes part of its success to SBA-guaranteed loans brokered by Craig G. Francis.
"East Village Tavern & Bowl was unique. I've always liked working with restaurants because while there are great risks there are great rewards, and Dan had already proven his business model." says Craig G. Francis, SBA Loan Broker.
SBA Loan Broker Craig G. Francis joins the conversation in the second half of the interview to discuss the elements of why he likes working with restaurant projects and how he was able to help faciliate these projects.
The SBA Loan Special Report can be seen at DavidKamatoy.comand CraigGFrancis.com, as well as on Viddler and YouTube in HD. For more information on East Village Tavern and Bowl visit BowlEVT.com
Craig G. Francis SBA Loan Broker talks about Smaller Banks Funding Loans...
When most people consider an SBA Loan they generally think of going to their existing bank, especially if that bank has an advertising budget to promote its loans. The reality is that some of the most creative SBA Loans are given by smaller boutique banks. I recently email interviewed Craig G. Francis, an SBA Loan Broker, in order to clarify the reasons to go to a small bank versus a large bank.
David Kamatoy: Craig, why do most business owners assume that it will be better to approach a big bank for an SBA Loan rather than a small bank?
Craig G. Francis:Most business owners go to the 'large banks,' B of A, Wells Fargo, Union Bank, Citibank, and the other trillion-dollar banks, because their accounts are there. Most small businesses have their accounts with the large banks. So it is natural for a borrower to go to the bank that holds their accounts.
It almost goes without saying that these large banks are a preferred source of lending – if you are in very good financial condition with an excellent credit score. Going to the big banks is the line of least resistance. When business owners are pressed to find a spare minute in their busy day they rely on their friendly 'big' bank. Besides which, who advertises that they have the best terms, friendliest loan officers, and most service-oriented account representatives?
David Kamatoy: When they get the official "No" from a bank, does the search need to stop there?
Craig G. Francis: When a business owner goes to their friendly large bank and gets the bad news that their loan was turned down, they usually stop there. Their loan officer may actually tell the client why they are being turned down and volunteer it as the reason that the client will not get financing elsewhere. The loan officer knows that if the client goes to another bank and receives the loan, that borrower will change their accounts to the more cooperative lender.
Of course, if a borrower gets a loan from their large bank account then they are in good shape. Large banks usually have slightly lower lending rates. But if they get turned down, there are two choices: 1, stop looking, or 2, look elsewhere.
If the answer is 2, then the client must start the process of searching for an alternate bank. Since there are no sign posts or firm guidelines as to which bank will make the loan vitally needed by the business, the search must be done in a piecemeal basis. It usually consists of a borrower submitting loan applications in a shotgun fashion. But there are resources to help narrow the selection of lenders involved in this search. The SBA is an excellent resource, with names of every lender in the community that is still involved in lending. The Small Business Development Centers can provide guidelines to assist in the search. Local accountants know of user-friendly banks and other financial providers. Brokers and other businesses in similar lines also may know of lenders still willing to make loans.
David Kamatoy: It seems that SBA loan programs often get strange reputations because the wrong people apply for an SBA Loan. Clarify for our readers who should really consider an SBA Loan?
Craig G. Francis: Well, those out there with an existing business or who want to buy an existing business should consider an SBA loan. These loans are also appropriate for business owners who want to buy property associated with their business. Of course, having good credit, or partners with good credit, and some form of equity are very important, particularly right now.
David Kamatoy: What do you do as an SBA Loan Broker to facilitate the process?
Craig G. Francis: As a loan broker I wear two hats. I process an application and put it in a format that appeals to banks. I also tailor the package to the client's needs and then target the best lenders for the type of loan required by the clients, whether it be SBA guaranteed loans, conventional loans, or other lending suitable for the borrower.
David Kamatoy: Who ultimately makes a decision in funding an SBA Loan at a small or big bank? [How do you ultimately make a decision between applying for a loan from a small or big bank?]
Craig G. Francis: Deciding which bank to use, small or large, depends almost entirely on which bank makes the loan. Rates, terms and conditions do not vary significantly from bank to bank, so the best litmus test of what type of bank to use is the one who offers you the loan you need for your business; particularly in this economic and financing environment
A smaller bank may be able to make quicker niched decisions versus the larger banks that have a tendency to make decisions based on formulas.
David Kamatoy: How does the current 2010 economic climate affect applications?
Craig G. Francis: The financing environment has worsened steadily for the last 3 years. I think we are still in for a rough patch within bank lending for the next two years, particularly as it regards the commercial real estate lending community, which has suffered from capital losses due to failed real estate projects and continued business weakness.
The banking and business community will start to recover when the unemployment rate comes down. Notwithstanding federal interference, everything relies on the consumer health and unemployment rates today and into the foreseeable future.
Consumer spending is going to dictate lending, real estate values, and economic growth. Banking is reflective of these factors since the banks are still being intensely scrutinized by the FDIC and Fed as to their past and present loan portfolios, possibly even more tightly than the past 3 years. This scrutiny is causing the banks to evaluate every loan application with an eye to whether the deal makes sense today and far into the future. Underwriting continues to tighten, and banks make each loan with an eye to whether their decision will be criticized by the FDIC.
Several new
lenders have reentered the lending arena with good capital bases...
My present pipeline of loans is very solid with many new applications, considerably more than 2009. This is due to the fact that several new lenders have reentered the lending arena with good capital bases, an eye to seeing how the deal can be done, and a certain knowledge that we will grow out of this economic rough patch. With so many banks now effectively out of business due to outright failure or credit constrictions, clients seek me out to help them with their loan applications. I know that if a business has survived until now, it is quite likely that they will be able to stay the course once the economy starts back upwards. Many lenders think this way as well. David Kamatoy: How do you facilitate the loan and the relationship with Smaller Banks?
Craig G. Francis: When I broker a loan, I look more often to the smaller banks, knowing that they need loans to survive and new account relationships to fill their war chests, and thus are more likely to agree to the loan than a large lender. I have nothing against a large lender except to say that unless the client is in first rate financial condition with excellent cash flow, there is little chance that the mega bank will do the deal.
David Kamatoy: Are there any other suggestions you have for business owners looking for a loan?
Craig G. Francis:I think it’s very important that anyone thinking about applying for a loan get the best advice possible before they plop down $500 or more just to have some service fill out the paperwork. In some cases all they are going to get for that money is the rejection that would have happened even with a true expert, except that now they are out the up-front fee that they really didn’t need to pay. If someone comes to me and they aren’t going to qualify, I’m going to tell them that right up front without charging them for useless paperwork. In some situations I may even be able to give them suggestions as to other ways they can fund their project. It’s all about listening to the client, asking the right questions, and helping them find the right path.
Craig G. Francis is the owner ofFrancis Financial MySbaLoan.com andSBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com,SBALoanStore.comor at 888-666-9722.
Craig G. Francis is our associate, client and sponsor. David Kamatoy has the experience of working with start-up and emerging companies for over 10 years. As a former Investor Relations Director he has the unique understanding of funding projects and communicating with investors and entrepreneurs.
Dan McLellan on SanDiego.com covers the press conference held at Madera Golf Club. While it makes sense financially and that we have not been able to prioritize the creation of the right offensive line that supports LT the reality is that a major face of San Diego Sports is saying goodbye.
As muich as this makes sense it's still weird. In the last few years we have seen so many faces of San Diego Sports say goodbye including Trevor Hoffman and most of the San Diego Padres.(Nice Stadium, I don't recognize the team.)
LaDainian Tomlinson still considers himself part of the community and plans to keep TOUCHING LIVES FOUNDATION Active and has stated that he will retire ultimately as a charger.
Dan McLellan,
Congratulations on covering the end on an era in sports history in San Diego, Ca and your placement in the News Sports Categories via SanDiego.com
The following is an interview with SBA loan broker Craig G. Francis.
In a letter dated Dec 14th, 2009, Sen. Robert Menendez urged President Obama and House Majority Leader Harry Reid to support a bill that would allow the SBA to provide $20 billion in direct lending to credit worthy businesses. This would supplement a plan to provide TARP funds to local banks for lending. That letter can be reviewed here.
I wanted to take a moment to discuss this suggestion with Craig G. Francis, an SBA and Commercial Loan broker who has placed over 2500 loans for about a billion dollars.
David Kamatoy: There has been a lot of noise lately regarding small business lending because the banks are afraid of making "bad loans," and so they are not lending with the same frequency. The challenge is that the economy needs jobs, and jobs are predominately created by small businesses. Especially at a time when large companies are essentially "streamlining" their businesses in order to be profitable. What is your initial impression of Sen. Robert Menendez's letter?
Craig G. Francis: I think the senator is well meaning but, being a liberal, he thinks that giveaways are the answer. Grants and direct loans, a form of fiscal welfare, generally results in little gain and frequently result in a loss to the lender or grantor. SBA's history is full of direct loans and their terrible payment record. I have heard numbers ranging up to 40-50% in loan losses.
David Kamatoy: How important is the creation of jobs by small businesses?
Craig G. Francis: There is nothing more important than Small Business (SB) job creation. If we don't have jobs, WHAT DO WE HAVE???? A 3,000,0000 sq mile piece of land populated by 300,000,000 homeless people.
David Kamatoy: The administration seems to be running focus groups with the wrong people, that is Big Business rather than Small Business. How do they reach out to the small businesses?
Craig G. Francis: Focus groups do absolutely nothing. Even with the right people giving you the answers you want, you can't lead by polls and focus groups. The marketplace will tell you what is going wrong or right. If the politicians don't understand the problems, focus groups will not help. Unless you are trying to create a SPECIAL OLYMPICS for ill-informed politicians who don't have a clue but want a gold medal for doing nothing, focus groups are a self-serving waste of time.
David Kamatoy: I think a lot of people think that the SBA is already a direct lender. Explain the difference between an SBA Guaranteed Loan vs. Direct Lending?
Craig G. Francis: An SBA loan is a bank loan guaranteed by the SBA. It is somewhat similar to FHA and VA loans. A direct loan from the SBA is funding directly from that division of the federal government to borrowers, usually in the form of a disaster loan. The SBA used to make loans directly to businesses in the 1960 and 1970 time period. The repayment of those loans was very poor, so the SBA got out of direct lending.
David Kamatoy: What are the pros and cons of the SBA doing direct lending?
Craig G. Francis: There are no pros for direct SBA lending. It is a loser from the start since the SBA is not set up to provide direct loans, and it would be a disaster to ask them to do this when their main mandate for the last 30 years has been to underwrite and guaranty bank loans. Imagine the fallout and blowback if the SBA started down this path. People would be lined up down the street for this welfare loan. Who gets the loan? Who is declined? What credit standards are used? For 30 years SBA has relied on the banks to do the underwriting, trusting banks to the point that the lender could approved SBA loans without direct oversight through the PLP (preferred lender program). The SBA is more of an advocacy plan with some internal loan approvals that have been thoroughly vetted and underwritten by the submitting banks.
David Kamatoy: The other Catch 22 is that SBA loans seem to work best with established businesses vs. new businesses. So a lot of new or "forced entrepreneurs" are not likely to look at an SBA Loan. What are the options for a new business?
Craig G. Francis: There are many options for startup businesses. Cash, Bank of Mom/Dad, investors, partners, and, potentially, an SBA loan are good sources of funds for start ups. The banks are quite restrictive in startup loans, as the economy is poor for this type of enterprise when businesses are closing by the thousands due to lack of sales. Drive down any commercial street or walk through a mall to see empty stores and more coming.
While it may seem counterintuitive to start a business in a very depressed economy, the intrepid entrepreneur can find a niche and fill it -- but only if they do substantive research into the business model and careful construction on plans and projections. This planning makes it possible for the startup to enter a business field when others are leaving a business vacuum. I've done several startups this year, but they have had extremely solid underpinnings. This economy is very different from past recessions, and I would not suggest that someone start a business without a lot of capital and a very well-researched business plan. Another way to look at it is this: Would you go out and play Tiddly Winks in a free-fire zone.
David Kamatoy: What is the ideal established business that should be looking at an SBA Loan?
Craig G. Francis: I would not exclude any business, including restaurants, hotels, construction and other types of high-risk business, from expansion today. There is no single industry that is most favored, and there is no single industry that is excluded from financing -- if the circumstances are right for that business.
David Kamatoy: What are the best uses by a business of an SBA Loan?
a. New Location
b. Buy Property
c. Expand operations
Craig G. Francis: Any situation that demands funding is the 'right' use of funds. Loan types range from startups and expansion to capital for inventory, labor, material, equipment and leaseholds, and business purchases. If the specific business situation demands it, these capital uses are the right funds for the business. Even buying commercial owner/user real estate, particularly at depressed values purchased with the lowest cost funds we have experienced in 50 years, is frequently a wise use of capital.
David Kamatoy: It seems to me that the lending of money to small businesses via a bank is still the way to go. How do we get the message out to the business owners, and how do we convince banks to lend the money?
Craig G. Francis: The question can't be answered easily. Banks are whipsawed by the worst economic and fiscal situation of the last 80 years. Banks loan losses are causing bank takeovers on a daily basis. Banks that are still lending are cherry picking to conserve capital and make sure loans are solid and sound. Many banks are prohibited from lending regardless of the quality of the deals, since they are under cease and desist orders from the FDIC. Banks are completely and extremely aware of the dire economic situation that faces business owners. They are very reluctant to make bets with bank funds to small businesses, the most vulnerable of borrowers. And the Feds are making it abundantly clear that the banks are NOT to take undo risks in light of capital requirements imposed by the new regulatory rules, such as marking assets and loans to market.
Notwithstanding Obama's jawboning and attempted moral suasion to goad banks to make more loans, banks will not sign a suicide pact with the government to make unsafe loans. They did plenty of those loans for the last 30 years under the Community Reinvestment Act and other government regulations designed to compel banks to make loans to unqualified people and businesses. The banks are making a stand against this now.
The business community is very aware of the lack of borrowing and loans today, simply by the fact that they read the papers and magazines about this subject. If they are borrowing, and that element of the business financing is down substantially, they know the road is bumpy and often impossible to pass. If the firm is not in first-class condition, the request will be turned down. This is a vicious cycle and a self fulfilling prophecy, because the banks are being hammered from all directions -- as is the SB community. I think this cycle is going to have to work itself out in time, coupled with the slow upward progression of economic activity. It is like a winter thaw. It will come, but slowly.
David Kamatoy: You have actually been successful in the recent tight economy in placing SBA loans for your clients. How different is it?
Craig G. Francis: I can place loans for clients who have solid credentials such as a good cash flow, a solid business plan, better than average FICO score, primary and secondary collateral in abundance, lack of excess debt, and good personal and business capital balances. These businesses are not as commonplace as they used to be since the home values have dropped, sales are down, and profits are impacted by rising costs and shrinking revenues. This is a Depression by any other name and could have been as bad as the 1929 crash if it was not for the $1,000,000,000,000 of federal funding dumped into the banking system and economy to help staunch the blood letting. We are not a healthy economy by any means, since unemployment ranges as high as 18%. Until employment and SB hiring resume, we will be in this rough patch for a few more years. The consumer and SB community are not healthy and won't be for a while.
David Kamatoy: How do you work with business owners that want to apply for SBA Loans?
Craig G. Francis: I am a loan processor and loan broker, with all that the process implies It is a simple and workable model. I work with the applicant to find out their loans needs, help them package and process the loan, and then target banks I think will fund this loan.
David Kamatoy: Do you have any other thoughts or advice to small business owners during these challenging economic times?
Craig G. Francis: If a person has a day job, keep it!! If you have a business, keep it!!!
If you want to start a business, BE ABSOLUTELY SURE the business will survive these lean times and thrive in good times. If a person spends 4 years to get a college degree, then for heaven's sake, the proto-entrepreneur should spend AL LEAST 1-2 years studying their intended field, involving themselves in the specific skills sets of that industry and business ownership, accumulating equity down payment, bringing in their personal brain trust, and making sure they START THE FINANCING process before they commit funds to the actual startup, signing leases, or spending large amounts of funds prepaying franchise fees and other prepaid expenses.
There is a classic statement that typifies a business owner: READY, FIRE, AIM! That is the usual modus operandi of a AAA-type entrepreneur. This is not the time for that reflexive action.
Ask yourself how Warren Buffet would approach the business. He has a $20,000,000,000 checking account. He does his homework before he writes the check. And he is one of the wealthiest men in the world. Want to make a small fortune in this life? Don't start with a large one and blow it. Do your homework!!!
Make haste slowly
David Kamatoy: Thank you, Craig.
Craig G. Francis: A pleasure, David.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com or at 888-666-9722.
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