Most Borrowers In Default Do Not Want To Do A Workout.
It is true, most borrowers in default that we speak with do not want to do a workout. They want to pay their bills. In fact, universally, they deprive themselves of their own paychecks to pay creditors. They use their personal credit cards and also their wives’ to support paying creditors. They wipe out their 401ks and IRAs to pay creditors. They even sell their homes to pay creditors. I would say that’s the bad news but it is what entrepreneurs do. They have a huge sense of responsibility and will do anything to succeed and paying bills and supporting their employees is part of what they believe to be success. There is almost no limit to the sacrifices a small business owner will make to support his employees and creditors, until there is nothing left to beg, borrow or steal from friends and family. We have seen it all.
It is this same ethic that prevents small business owners from downsizing appropriately and reducing their payroll as they understand the impact this will have on the employees and their families. They simply do not want to do it. They would rather self-sacrifice. The problem occurs when they simply run out of money. This typically happens long before an entrepreneur is forced to give up and succumb to the need to do a workout.
The real problem is the small business owner who gives up and folds his tent, letting everyone who has depended on him crash and burn along with him.That is defeat, accepting the loss, giving up. It is a tribute to the honor and spirit of an entrepreneur that he would prefer to pay his bills and creditors and keep his employees employed at his own personal loss rather then slash and burn, but what choice does he have? None.
There is no joy in “beating” the bank or the creditors. There is no pleasure in letting people go. There is reluctant acceptance that saving the core business and a smaller group of employees is a good thing. There is a sense of defeat and loss. They feel they did not reach their goals. In fact, it may even be said in quiet corners… they failed. However, in this economy I constantly ask the small business owner how they could possibly hold themselves accountable for the rapid decline in the economy. None of us had any warning it was going to happen, nor could we have done anything about it even if we had known.
It’s a survival game, survival of the fittest and yes, there will be much collateral damage, at a huge cost and with deep pain. However, the entrepreneur has a higher responsibility to persevere, to hang on, to do whatever it takes to succeed. If it requires doing workouts with vendors, banks etc. and reducing the payroll, and not paying the unsecured vendor or personally guaranteed debts, then when the chips are down and all bets are in, they will do what they have to do to survive another day, despite their reluctance and unhappiness about doing what they must do. They will workout their debt. What other choice do they have?
I understand the code of honor we small business owners subscribe to. I get the integrity, the value of one’s word, the commitment, the sacrifice. However, what choice do we have other than to fight the battle and win any way we can so we can last another day, to fight another battle? Hallelujah!
