What Would You Do?

Rolex watches personally owned and valued at $120,000

?Unpaid IRS tax balance owed and outstanding at $130,000

Both reflected on an SBA personal financial statement.

Individual would like to purchase finance an established profitable small business.

His total business acquisition SBA loan project credit request is for $2.6M – unsecured.

aka as $2.6M airball ?? aka as $2.6M blue sky ???

Suppose the SBA change of business ownership bank financed loan project should fall into early default.

In that case, the SBA, an affiliate of the US government supporting small businesses, will guarantee 75% of the bank loan balance should the loan go into default.

Early default would define the SBA guarantee would pay the bank $1,950,000 toward the early default loan balance, and the bank would charge off the remaining $650,000?loan balance.

Remember, this is an unsecured loan.

There is no collateral to repossess and sell to lower the bank loss.

If you were the bank SBA underwriter, WHAT WOULD YOU DO?

There are five C’s regarding credit review of individuals.?

One of them is known as CHARACTER.

Regarding the individual proposed, who owns a lot of nice assets, including Rolex watches worth $120,000 and still owes the IRS back taxes of $130,000...

Right or wrong regarding character of proposed applicant, if you were an SBA bank underwriter reviewing this file, would you feel comfortable extending an uncollateralized loan for $2.6M? Remember, the SBA will offer a 75% guarantee.

I know what "some" SBA top-performing front-end lenders would suggest the proposed business buyer, bank borrower to do, behind the scenes.

Character then, may be a completely different assumption to the SBA underwriter based on front-end SBA lender steering the borrowers to sell the Rolex watches, and pay off his IRS back taxes.

Once complete, then the individual re-do the SBA personal financial statement reflecting no Rolex watches on hand (as individual sold) and no back IRS taxes owed (as individual used the proceeds from the sale of Rolex watches to pay off the IRS taxes owed).

Front-end SBA lender shreds the initial SBA personal financial statement to ensure no record of it found.

It happens.

I have lost business broker partnerships because of what other SBA front-end lenders do behind the scenes.

I prefer to have integrity booking quality SBA business acquisition loans on the bank books.

Right or wrong, what would you do if the original SBA personal financial statement came in "as-is"?

Would you trust this individual to pay the SBA loan payment should the business cash flow start to struggle?

Would you sleep at night with this $2.6M unsecured loan on the bank books with the proposed individual as the business owner and personal guarantor?

-Deb

Deb Curtis is a direct SBA business acquisition preferred lending specialist supporting change of business owner loan projects starting at $500,000 up to $5M in all 50-states.

She coaches business listing brokers and their referred buyers on how to prepare a quality SBA change of business owner credit application package from start to successful SBA loan approval and funding.?

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