Article by Roger Schlueter, MBA
*** This Article was amended on 6/29/2013***
Sometimes even the Best of Us Must Eat Our Words! This article was written when I had a Project that was Turned Down by SBA. You only get One Turn Down and Two Resubmissions. The Project had been Turned Down and Resubmission #1 had been Turned Down. I really thought that SBA did not want to change their mind, even though I felt they misunderstood the project and it’s cash Flow.
This is a learning Experience that almost anyone who gets a Loan Approval from someone else can learn from. Looking back on my Application I feel that I did not do a good job in explaining the Project and it’s Cash Flows which had changed from when the Borrower had originally written his Business Plan. I had included the Original Business Plan because I used some of the Sales Projections in my own Sales Projections. The Business Plan should have been rewritten to comply with the New Information and New Loan Structure. I admit that I took the easy way out and copied the Original Business Plan and put it in the package.
Any Higher Authority that has to Approve a Loan Package only goes by the Information Given and has a hard time deciphering what the current information is and what the previous information was. They, do not and should not, be changing or interpreting your project. The Information in the Package should be precise and accurate enough to lead the Authority to one Loan Proposal that is understood by all who look at the information. Any information that is no longer valid should not be included in the loan proposal.
This was a Project that we thought was a Good Loan, we were very adamant about the loan being approved by SBA. After the SBA had all the information and was not confused by misleading information they Approved the Loan. Loans that are changed in the process of Applying can cause problems for any Packager or Loan Officer who has not gone through and changed all the Package to comply with the New Loan Proposal.
The Small Business Administration usually tries hard to approve loans that banks bring to them. The SBA will sometimes decline a loan and will give reasons for the decline. These declines can be resubmitted to SBA for a Second Look but the Decline is rarely approved on a Second or Third Try.
The SBA will state on it’s decline that the loan has been declined on a First Consideration. The SBA will give the Bank three considerations. It’s kind of like the ole, “Three Strikes and You are Out”, saying. Rarely are these declines approved on a reconsideration. The Decline I just had with a bank listed several reasons for the Decline and the Bank took great pains to overcome those objections. The SBA Loan Officer used New Objections on the Second Decline which we thought was unfair. They seem to be unwavering in their Considerations after a First Decline. I really do not think they will change their mind for any additional information or any additional conditions. They have made up their mind and any attempts at Approval are futile.
In the Old Days, the bank could go to the local SBA Office and they would go to bat for the borrower and the Bank but those days are gone. The Centralized Processing means Centralized Approval. The Local SBA Office is a Marketing Arm of the SBA and does not seem to have any real influence on the Loans Approval or the Approval Process.
Sometimes, things do not get better. Things are definitely better for the SBA and their Approval Process but not the Borrower or the Banks. I sometimes wonder if the SBA really knows, who is their customer. I would think their customer is the Bank and the Borrower but alas, the Real Customer is the Legislature and the Government Bureaucracy.
Please address any questions or comments to this blog or to roger@rogerschlueter.com