Government Super Commission Deadline Approaching

The Government's super commission on debt is fast approaching it's deadline for making a deal before automatic spending cuts take place.

It's hard to see the commission coming to an agreement, and it's hard to see the commission not coming to an agreement. The issues are the same as with the debt ceiling debacle in late July and early August. Neither side has shown more flexibility in the issues.

The problem is that if an agreement is not reached, automatic spending cuts will occur, which, in the ensuing months, will result in a significant push back by the public and at the polls.

After all, just about everyone seems to favor spending cuts. However, when the question is to cut spending that affects the person who is asked the question, the poll numbers change dramatically towards no, especially if it involves Medical and Social Security.

Apparently when people are asked if spending cuts should happen, they assume it will be spending cuts elsewhere and it will not affect them.

Some of these cuts will be severe and will affect many programs, such as Social Security, Medical, and popular programs such as farm programs, education programs, small business administration small business loan programs.

European Debt Crisis Averted

The European debt crisis has been averted, and nervous markets have picked up and recovered.

This story was not of tremendous interest on the "west side of the pond" but most European citizens and many finance ministers understood the chain reaction that could have occurred if Greece and some other countries began defaulting on their debts.

A default by Greece would force some European banks to have potentially have fully charged off the full value, or close to the full value of the debt, which could have, or would have caused tremendous losses and a major burden for many banks. A failure by any of such banks that have significant debt holdings in Greece can put the banks stability at risk. Any large bank failure will have devastating effects on the Euro markets for years.

Crisis averted for now.

Are banks hoarding cash?

Banks appear to continue to hoard cash. In many cases, the origin of this cash is either taxpayer money, or U.S. government borrowed money. Yes, banks may actually be hoarding money borrowed from China, Japan, etc..

This very likely took place due to the government bailouts of banks in 2008 and based on many news reports, continues currently. Due to the continued slow economic expansion, and now slowdown the in the current expansion, banks are still reluctant to expeditiously lend out money to both small businesses for small business loans, small business leaseback loans, as well as to individuals.

In essence, they are still hoarding cash, due to uncertainty, which itself is a drag on the economy.

The turndown rate at banks is about 90% - 95% on business loans

A major fact that commercial banks, upon applying, even with the correct loan officer at the bank, do no want you to know is that the turn down rate at regular commercial banks is approximately 95% for business loans of all types.

This is certainly not a fact they want to advertise and you will not be seeing commercials about this. It is unfortunate that small business owners go to the bank without any realistic knowledge of how hard it will be to get approved, and that the likelihood of being declined is so high. If business owners knew this, they would very likely not go to the bank in the first place. Many business owners go to the bank truly believing they will be approved.

They end up being shocked at all the requirements the bank has, credit wise, collateral wise, and financial statements wise, and the experience they have gone through afterwards, only to end up being denied, and in many cases, somewhat offended, based upon perceived advertising by those same banks prior to their visit, and perceived expectations.

Ask about the Parameters of the Loan program

Ask the credit officer what are the parameters of the loan program you are applying to. Ask the following:

- What are the dollar ranges small business loans are typically approved for for this product?

- If you bank statements and /or financials are strong, offer to provide these. Many times the
rep will say, "You don't have to provide that". If your financial statements are strong, this is a
very common error that is made in the credit process. It is true that financials may not be
required, but if your bank statements and financials are strong, you will want to provide them as

they will help your cause. If you are dealing with a customer service representative, they will
not even understand why you would want to do that if it is not required, and may try to tell you

not to provide it. Once the request goes to credit review, be assured, if strong bank statements
and strong financials are there, this will strengthen your request in a substantive way.

Increase in patients having problem paying

Post by moderator.

I spoke with a dentist in Maryland who is having a significant cash flow problem at this time. He said he customers were having a problem paying him. After talking with him a while longer, he indicated his accounts receivables, 0-30 days are approximately $35K, 31-60 days are $65K, and the total are approximately $135K.

This dentist indicated he knows he will not received near the $135K due to insurance company reimbursement. If he could get now, the part of the $135K that he anticipates getting within the next 60-90 days, this would solve his cash flow problem, and greatly enhance his business because he could then do marketing to increase his customer base.

I told him that in the last several years, I have had trouble assisting physicians finding receivables financing under $150, as many programs won't touch anything under $150K or $250K, and that means $250K in accounts they are willing to factor. Since many accounts will not be to the liking of credit, a dental practice may have to have a factor far higher than the $150K to $250K if they want to be within the dollar ranges that are accepted.

Apply with the right person

When you enter a bank with the hope of being approved for a small business loan, find out what the job title is of the person that is helping you. Make sure they are not just a checking account representative that is taking the application because the loan person, or loan officer is at lunch or out that day. Ask them "Are you a loan officer? If the answer is no, I suggest saying "Who is and when will they be available?"

Don't let them off the hook on this issue. The employee will very likely try to assure you that their taking the application is fine. It is not! You have questions to ask and if they are not much involved in the details of credit day to day, they do not know what is in your self interest.

The business owner decides to get a loan

You are the business owner. You are driving down the interstate and see the advertisement from a major bank on a huge billboard that says they are the small business lender and you should see them.

You decide, "If they spend that kind of money on advertisements, they must really be making a lot of loans". This makes sense. You decide to go to the bank the next day and discuss a loan with them. The next day, you go to the bank, and eventually you speak with a loan officer. This person may well not be a loan officer. To your surprise, the branch you go to may not even handle business or personal loans anymore. It all now be centrally processed, and the branch is just the "front man" for the processing.

If you are in the branch asking for a business loan, this is very serious for you, & the staff there may not even be involved in your request when, as well as after you apply. If you apply at the branch, the person you are speaking with may not even speak with you again after you have applied.

Find out at the branch, do you all procure loans in the branch? Are you a loan officer? Are you going to handle this request?

Business Loans

Businesses go to banks with the belief that the bank should, and will loan to them. There is a huge gap between the number of businesses that think they will be approved and the number that actually do get approved.

The approval rate at major financial institutions is approximately as low as 5% to 10% for business loans. This is not a fact that banks want you to know. If customers knew this, they would be much more apprehensive and have a much more negative view of what their bank can do. Enter Marketing. Banks spend millions of dollars in advertising with such slogans similar to "Small business owner - meet small business lender". This slogan was used in the last years on major billboards in a large southern city.