Signs of love from the SBA on the workout side…but it won’t work, it’s the wrong answer.

Wow, I an amazed, it is happening… a little. I see evidence of the SBA  allowing a slight improvement in workout terms and conditions, being more generous with interest and deferment. Even lengthening the term appears possible, it appears to be dependent upon the cooperation and support of the banker handling the loan. But it is happening…a little.

Here is my take. What difference does it make, loan modification, no matter how attractive, is still putting a band-aide on a cancer. It won’t work. It simply removes more cash from the borrowers business with liquidation still on the horizon.

Reality is, revenues are down, so how ever you do adjust the loan terms and conditions are irrelevant as the only adjustment that would mean anything is the reduction of principal . That is a workout I can support.

Just because the bank will give you 3.5% interest for 9 months and allow you to pay interest only, a very sweet deal, does not mean your problems are solved. In 9 months when full debt service returns it will be as crushing as it was when you previously  stopped paying.

Reduced revenues require reduced debt. That is the only truth. The only way to survive.

No debt is best, that really covers any reduction of revenues. No debt allows you to adjust more widely  to market conditions and allows you to operate at levels impossible before. Who can predict how low revenues will drop and for how long?

Stripping the debt off the business is exactly what is needed. That is the answer, not modification, no mater what it may look like.

Call me for a no obligation tele-conference to discuss how this could work for you. 413-584-2581 ask for Norm. He will arrange it.