Has the SBA completely lost their mind? I think so.

Presumably, the SBA exists to support the most important sector of our economy, the small business sector. While less visible, less powerful, and thus less newsworthy, they account for estimates of at least 70-75% of the employment in this country and certainly a gross dollar injection into our economy that is just as sizable.

Thus the Government has appropriately  deemed this sector worthy of special attention and support, and so the SBA guaranteed loan program was designed to support the capital requirements of the small business sector with loan guarantees, assuring the small business owner that he will be able to get the loan he needs to pursue the valuable small business dreams he has and thus employ people, pay taxes, and keep our economy rolling.

Just as clear is that as in any sector there will be a default ratio and possibly higher in the small business sector as many of these borrowers are more likely to face  high peaks and deep valleys in their evolution and thus high potential for default is a   reality.

In their infinite wisdom, the SBA has created an Offer in Compromise system to provide relief for personal guaranties to protect and  not wipe out the  commerce, families and homes that are so valuable  and important to our economy and society.

Presumably this Offer in Compromise program is designed to determine the net liquidated worth  of the borrower and design a payback program which accommodates a payback of what their net liquidated value may be. Thus the SBA gets a maximum return and the borrower lives to work another day…with his family intact and in the home they are working to pay off.

But apparently the system has its flaws and broke down recently as follows:

We support many SBA guaranteed loan borrowers who cannot afford to hire us, with our own non-profit program, designed to support those in need .

One client we have was running a family used auto parts business until Katrina wiped them out. They lost everything they had in the storm and have been working ever since to try and recover. They had trade debt, credit card debt, lines of credit and of course he SBA guaranteed loan of $75,000.

The wife is a retired school teacher and the husband now working fr $24,000 per year  as he was previously employed by the family business and is now working for what ever he can earn, instead of enjoying his retirement.

We have successfully worked out all his debt except for the SBA loan, which we applied for an Offer in Compromise as if ever there was an applicant worthy of support and assistance, this is the one.

They could afford very little, there home is totally upside down and they have nothing else other then this $24,000 annual income, barely enough to cover the mortgage and put food on the table…barely.

The offer was a $2500. payment to be paid out at the rate of $100. per month, also unaffordable but the best we could do.

Not only did the SBA refuse their offer, but they also counter offered as they typically do,  but this time with a demand for full payment all $75,000. !!!

Are they to rob a bank, print it in their basement, that remains flooded? Would the SBA prefer to force them into foreclosure and liquidate their home which is valued below their current mortgag and despite the fact that the SBA will incur costs but receive not one penny? Is this the plan? So it would seem…what choice remains for them.

So I ask the new director, what is the point of an Offer in Compromise program if this is the result?

What are you thinking Madam Director? Can we attend to this unimportant detail, the wiping out of families who have done their best only to be undone by Mother Nature and then destroyed by our benevolent government program with their Offer in Compromise program that has no respect for their own charging orders?

What’s the plan  now, support the half dozen banks and auto industry because their jobs are important but step on the small business sector who is responsible for 70% of the employment base because they are made up of small players with less power?

I guess this is what fairness and effective government is all about….

How sad.

Of course we will fight the battle and win for our client as we always do, but why is this a war? Why is this system not working better? What is happening to those who have not hired us? Do they simply lose their home, or remain indtebted for the remainder of their life? Is this the offer in Compromise program the SBA wants? I hope not, but unfortunately it is what it is and I write this letter from experience and first hand knowledgeso I now the truth.

Call us if you are having difficulties working our your loan, we have the fire power and the skill to assist, our clients get the results they need…even this one will.

Call for help. Norm will arrange a no obligation teleconference.413-584-2581