Hey old friends. It has been a long, long time. The last time I wrote a blog post was probably about six months ago, right around when COVID started. You may be thinking that COVID would be a boon for a business like mine, but the truth is like so many other businesses COVID really screwed me and screwed me up pretty badly.
Now, why is that? Why would a business that helps failing small businesses, not have any business when so many businesses are forced to close?
Well, friends, I will tell you why.
Our magnanimous government pumped out so much money into the world that you guys have not needed me for the last six months. Primarily, the SBA decided that they were going to cover every business’s loan for six months.
This is unprecedented people.
The SBA didn’t defer payments. They actually made the payments. So they mailed six payments of your loan payment to the lender. That’s a lot of money folks. And so for that reason, businesses who were unable to make their payments at that time, guess what? They didn’t have to close. They didn’t have to shut their doors. They didn’t have to think about how they were going to settle their debt because their loans were covered for six months. Businesses that might’ve been failing were in a holding pattern, waiting for the SBAs payments to run out. Now that we’re into September, some of them finally have, and as a result, my phone is ringing again.
The other reason that my business slowed down is that the government started offering paycheck protection loans. You’ve all heard of it with the acronym PPP. That is the paycheck protection plan. For those who don’t know the way that worked was that the government gave forgivable loans to businesses. As long as they used the funds for payroll (how much they should use it for payroll actually varied over time) but the bottom line is the SBA was issuing forgivable loans. Now the fact that those loans are forgivable, that in of itself, didn’t actually hurt my business.
But what did, you ask?
What hurt my business is the fact that people started Googling “SBA loan forgiveness” because they wanted to understand the forgiveness feature of the PPP loans. Do you know who used to be in the top spot for the Google search of SBA loan forgiveness? That would be me. Where am I now? I would say I’m probably on page seven or eight.
The good news is a lot of my competitors got knocked off page 1 too, but essentially one of the keywords that was my meal ticket is gone. And that’s happened with a couple of the other keywords as well, which has made it a little tougher for them to find me, which is a shame because everyone who has a PPP load is now Googling SBA loan forgiveness to understand what they have to do for their PPP loan forgiveness.
What a pain in my butt. But I’ll be honest. I enjoyed the time off since my kids and probably your kids as well, haven’t been to school since last February. I really needed a mental break. There is no possible way I would have been able to run my business effectively while also teaching my kids for the remainder of last year of school year.
The good news is this year, his model is a little different. The teachers are doing virtual teaching, which means I don’t have to be as involved. So now that I’m back, the question is what can we expect going forward?
Well, the first thing that I’m expecting is that the pendulum is gonna swing back the other way, as far as the SBAs stance on offer in compromise and settling conventional SBA loans, mostly 7a. And what I mean by the pendulum swinging the other way is that up until COVID started, I was seeing the SBA turn down a lot of offers that I considered to be reasonable. All I can really do is go based on historical decisions, and I was finding that settlement offers that had previously been approved were now being declined.
I think at the height of the economy, the SBA was becoming a little more aggressive in what they were expecting from borrowers. Now that there’s going to be a tidal wave of defaults coming their way, my expectation is that defaults will be treated like they were 10 years ago during the last crisis. And by that, I mean, if you come to the SBA with a reasonable offer, after your business is closed, I expect that the SBA will be more than willing to consider it.
The other thing that I’m expecting is that decisions times are going to be much, much longer than they have been for the last 10 years or so. The SBA has pretty been pretty consistent. If you submitted an offer to the bank and the bank forwarded to the SBA, you could expect an answer within about two months.
These days, I honestly have no idea. When COVID first started, I reached out to the SBA to ask if they were even processing settlement offers, and the workout officer at the SBA told me they were, but at that moment (March 2020), resources were being diverted to assist with PPP loans.
Now that that program is largely over as far as issuing loans, my expectation is that those employees have been pulled back to work on their traditional jobs of reviewing SBA offer in compromise. But what I don’t know is what the backlog looks like.
The hope is that they will bring in additional help and as they do that, they will be more responsive. What I don’t know, but what I’m hoping is that they will be more lenient than ever in recognition that most of the businesses that are failing are doing so due to no fault of their own.
So that’s it. Just wanted to put out a blog post to let you know that I’m back and better than ever. So if you have an issue with your SBA 7a loan feel free to reach out and I would be happy to chat.