While Nero Fiddles in Washington

• tamelarich
• October 28th, 2009

When politicians pay homage to all the "right" constituencies on the campaign trail, small biz is in line right behind motherhood and apple pie.

Then they're elected.

Last October I actually took the time to write to my representative suggesting Congress should focus its attention on programs for banks whose business models hadn't been sidetracked by exotic financial instruments -- keep the healthy institutions alive instead of trying to bring zombie banks back to life.  For the record, I think those zombie banks should have been nationalized.

Good news from SBA?

Last week the president announced that he would divert excess TARP funds to the SBA to keep the true engine of the economy (small business) running. "If you want to help small business lending, you have to make special efforts to help banks that are most prominent for small business," said one senior Administration official. The official said that while on average banks with more than $1 billion in assets typically devote about 21% of their commercial loan portfolios to small business loans, community banks with less than $1 billion in assets devote 56%. Since community banks didn't get TARP funds, this explains in part why small business lending is stalled.

SBA will work with Treasury to increase the maximum size of  7(a), 504 and micro-loans. But will it really matter? Lenders base small business loan decisions largely on personal credit scores, not D&Bs -- even when the SBA agrees to share the risk.  And if any demographic group is vulnerable to credit score deflation it's small business owners, who co-mingle personal with business funds as a matter of course.

The real world of small business finance

Here's how it works: the the meltdown takes out a couple of customers/contracts and you have to come out of pocket to keep the business afloat. This means your personal bills fall behind as well as those of your business, and now everyone's reporting you to the credit bureau. I believe the technical term for this is "double whammy." Been there.

I watched the president of the SC Small Business Chamber of Commerce on Carolina Business Review Friday night. He opined that the SBA's program wouldn't help unless the banks were required to lend money. Paulson had no problem going to Congress a year ago with a 7-page outline of how to spend $700b but no living politician has the guts to suggest we give small business owners a crack at $5-10,000 without a second on their home and proof that they don't really need the money.

What's a small business person to do while Nero fiddles in Washington?

Don't do what I did: pretend you can ride it out without several months of cash to fund operations. Call a bankruptcy attorney immediately. Most don't charge for the first appointment.  In addition to bankruptcy counseling they can help you negotiate with creditors or develop what's called "asset planning and protection" strategies.  Go ahead and tell the attorney you want to do everything possible to avoid bankruptcy when you meet.  BUT BE SURE AND MEET.  Knowledge is power.

What else can you do?

• If you have contracts, ask your customers to pay incredibly fast for an unbelievably good discount
• If you have contracts in hand  you may be able to fund an orderly winding down of your business by selling them to a competitor. Swallow hard and make some calls
• Check with the state on whether you can put your staff on what's sometimes called "temporary/partial unemployment"  to avoid laying them off altogether while giving them money to feed their families
• Prioritize loan payments on real estate and property/equipment you need to live in/run your business with -- yes, I know you want to pay everyone on time and have usually done so, but these are extraordinary times and you must live to fight another day
• Investigate factoring -- an absolute last resort and only to be used if you have business in the pipeline
• Call your local office of SCORE and see if one of their seasoned executives will be a sounding board for you during this tough time
• Establish milestones for making decisions. For example, "If I get X contract I'll do Y" and "When I get to $ X in the bank I'll liquidate these assets"
• Call everyone for better terms. Most would rather have something than nothing. Again, this is where an attorney can earn their keep
• Get psychological/spiritual counseling

I know it's tough.  Here's some heart talk:

• It amazed me what some positive self-talk did for my mood.  In the mornings I'd get in the shower and make, and I mean MAKE myself say aloud "Today's a great day.  Today's a great day because I'm alive.  Today's a great day because my dog loves me..." The reverberations of the your voice on the shower walls are good reinforcement  and there is always, ALWAYS something to be grateful for
• I bought a couple of boxes of illustrated affirmation cards and selected a new one or two every day that best addressed my current fears.  I hung them from the rearview mirror to be reminded of messages like "I release all feelings of worry and guilt"
• I had a blotter on my desk that I doodled on during phone conversations and voicemail hell.  I learned that if I wrote and re-wrote prayers instead of mindlessly doodling I felt stronger.  Here's the one that gave me the most peace

O God!  Refresh and gladden my spirit.  Purify my heart.  Illumine my powers.  I lay all my affairs in Thy hand.  Thou art my Guide and my Refuge.  I will no longer be sorrowful and grieved; I will be a happy and joyful being.  O God!  I will no longer be full of anxiety, nor will I let trouble harass me.  I will not dwell on the unpleasant things of life. O God!  Thou art more friend to me than I am to myself.  I dedicate myself to Thee, O Lord.

Remember, your business is a drop in the economic ocean.  If you get caught in a riptide, do what it takes to stay afloat until the seas calm again.  Sometimes this means you must jettison your beloved business to keep your family afloat. Godspeed.

Tamela's here for small business owners who are watching their dreams and livelihoods go up in flames. With the credibility of someone who's been there, too, she writes about dealing with creditors, the IRS, family members and your own inner demons. She now earns her keep as a business ghostwriter. http://TamelaRich.com

Tickers: asset planning & protection, attorney, bankruptcy, business life cycle, community banks, creditor negotiation, depression, making an informed financial decision, recovery, SBA, SCORE, small business, zombie banks

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