Dashboard: ‘We Can’t Keep Up’

[Music] welcome to another 21 hats dashboard I'm Lauren feldin and I'm here with Amy casar who is founder and CEO of multifunding Amy's an all-around expert on small business finance who has been a guest here many times welcome back Amy Lauren always a pleasure to be with you my friend I mean there's a lot going on right now uh so much in fact that it would be impossible to keep up with all of it one of the storylines that I fear can get lost uh for business owners amid all the confusion surrounding tariffs and immigration and Doge and everything else that's happening is the small business administration which happens to be an agency that you work with and track all the time we've heard about Mass layoffs offices closing around the country and even the possibility that maybe the agency would be shuttered um do you know what's going on no I was afraid of that but I don't know what's going on um Lauren but I have this General attitude which maybe I learned in Co I don't know but during lots of chaos just to try stay calm and focused on what you can control so Finly enough I'm more worried right now than anything else the government won't be able to agree to to fund itself in the next 10 days or so and that could be the biggest disruption of all and um you're talking about a possible government shutdown possible government shutdown so that's to be honest the the biggest thing I'm worried about right now although there's not much help Waring can do about something that you can't control so we are rushing to get um anyone who's got a loan in process now should try get make sure their as the uh their borrower has a uh their loan has a number with the SBA already um so that um should it shut down they the loan can still close so that is my biggest worry at the moment um hopefully they'll come to some agreement and accommodation although it's hard to know who's agreeing with anybody in Washington these days all right so even though you don't have eyes inside uh Doge or inside the SBA to tell us what's going on there uh there are a number of issues some of which you've written about in your 21 hats column that I think are worth uh discussing one criticism you're hearing of the SBA these days and possibly as an excuse to to rein it in is that there's been way too much fraud in SBA lending and then there has been a lot of that's related to co um you wrote recently about the difference between fraud and just bad lending policy can can you talk to us a little bit about that sure so first of all flu really has always been a minuscal issue in SBA lending um prior to the last really prior to co um I think that there are a a a a couple um things that listeners should know that are relevant and important that uh the majority of fraud that came into the spay that is often talked about is with the PPP and the idol program but I think you have to the listeners have to be people have to be very careful about I think in Washington language they call everything fraud but there's a difference between fraud and bad policy so if someone if a loan was made to a borrower for million idola and the borrower was a legitimate borrower and they followed all the rules of the program and now they can't pay it back as many can't that's not fraud that's bad lending policy fraud is if someone showed up a fake ID or fake Social Security number and or got money for business that didn't exist or got the load and went to buy a jet or this and that and the other that's fraud so you to just call it all fraud I think negates the the responsibility or the focus of it keep in mind that um there were about $250 billion doar of very large Idol loans made towards the end of covid when Co was largely over and half the businesses actually did very well during Co although the government never realized that and it was so good to be true it was 30-year money fixed at 3.75% and it was lent out with no proof of economic injury that in my mind is bad lending policy was that a change did is that something that wasn't the case at the beginning uh of the covid idol lending there's two two dynamics of Co in in first of all the the co program the idol program which has always been designed for like when a tornado or a hurricane or an earthquake like wipes a business off the face of the Earth was never structured to or even think about or comprehend something like Co um when some of the big hurricanes or storms hit the South there was a few States they couldn't handle that but nationally they couldn't handle it so in the early stages of Co they C the loans at 15 $50,000 and they almost gave them out like candy and that was probably the right thing to do at the time got a lot of money out on the street and people needed it and there were roughly 3 during the first Trump Administration there were roughly 3.6 million of those loans made and the average loan ticket was about $70,000 now I no doubt there's a good amount of fraud in that portfolio and a good amount of people who can't pay it back didn't even understand the terms of the loans when they got them then when the Biden Administration came in there was roughly $250 billion left in the budget and I think they wanted to get the money on the street while it was still allocated and they quickly increased the load Mass to 500,000 and then shortly after to 2 million without any proof of economic injury and so really the loan amounts average loan amounts in the Trump administration were approximately $70,000 and then the Biden administration were approximately $700,000 they 10x them and literally they handed the money out like cotton candy or I think I wrote once like a bunch of drunk corporate soldiers like trying to make sure their budget was used by the end of the year and get the money before it's Del late get the money before to late and people's balance sheets got flooded and then they deferred payments for like two years and then suddenly payments were due and people didn't know what to do so combining that is some fraud and in my opinion a lot of bat lending policy the other thing we've been hearing about of late um there have been headlines about the SBA I believe it's the 7A lending program being in the red for the first time in a while what was that about Lauren I don't know if you recall I going down to testify at the house business committee maybe two years ago I can't remember 18 months ago I do and and writing a lot and screaming up and down to stop stripping all the guard rails out of the program really in an effort to make lending easier for finex to do smaller SBA Loans they stripped out so many of the controls of the program I think it what you wrote about Amy was the idea that they were going from forcing business owners to deal with approved lenders the traditional Banks and opening it up so that non-traditional lenders um the kind of places that'll give you money overnight for a very high uh interest rate could make SBA Loans correct all the fintech lenders and or as an example and I I think I I shared this story in my testimony that during Co once I met them I was asked to be a guest speaker to a a black entrepreneur group female entrepreneur group for a local church and my SBA slides never came out so here's an example there was a woman there who wanted to do a business where she um um she wanted to start baking desserts for restaurants that didn't sell them and Lauren she' been trying to raise 40 or $50,000 for like two years so she could build her own kitchen so she could start making the the desserts to go out to the restaurants and I said to her honestly start making the desserts in your kitchen at home or go rent a kitchen at a restaurant for an hour a day and bake there why the hell do you need your own kitchen and she had never thought about that before in the old way to get an SBA loan she would need a full-fledged business plan thought out and a ton of work effort and sweat and blood to be able to go get that loan for $40 or $50,000 if she wanted it in the new program they stripped things like business plan requirements and all kinds of things and different guard rails so that the ftech check lenders could try get the loan done within a week and that's just one example of did she get an SBA loan I don't know what happened to her in the end but the um that's just one example of from my perspective um why um responsible lending takes time like if you think about it in our business here to get somebody a 10year SBA loan at 10 a % which is much higher than it was several years ago um it's several weeks of work but you get responsible monthly payments and the loan that will afford that borrow the opportunity to live to fight another day and to for the debt to work in their favor instead of against their favor if you that borrower might fall for the temptation of one of the line ads that would say I'll fund you in 24 or 48 hours and you'd save all that work in aggravation with the exception that the payments will be so high that it would almost like kill that cash flow so they're trying to make spa loans speedy and quick and in my opinion they shouldn't be and we are seeing a dramatic upti in the in the rise of early stage defaults uh loans made in the last 18 months shown distress and we are showing a dramatic rise and also the SBA had they in the Biden Administration they waved a bunch of fees I think for loans up to a million dollars so there were no fees and those fees went to fund the program and they wed all those well those should come back and many of the guard rails should be back as well are you concerned that this could be used as an excuse to do away with or reain in in of the lending programs no I think that the lending programs are would it uh it would be uh way too politically dangerous I don't think they're going to do away with the landing programs now might they take the leting programs and move them to the Commerce department and get rid of a lot of the other programs theba does maybe but I don't think they're going to get away do away with the vending programs got it what do you do you think there's I guess you don't really no but do you let me ask you this way do you think it would be uh a loss for small businesses if the lending programs were continued but the SBA ceased to exist I mean there are lots of interesting programs and initiatives that the SBA does training like score and sdc's and things like that and and support like a lot of the minority programs are gone already I think so the other thing that's we haven't really talked we've talked about at the beginning but the SBA today administrates administrates the whole idle program if there's a you know National disaster somewhere um so where that would go I don't personally think they're going to do away with the SBA I'd be very surprised has any of this had an impact on your business what impacts our business is more like if there's a tax transcript issue and we need help with the IRS to clear it there are a lot less employees at the IRS today than there were two weeks ago and you're already seeing the impact of that oh yeah or like we had a loan getting ready to close next week and for the first time in a long time we had an error code I've written about those previously uh pop up and it's a legitimate question like will we will it take a lot longer to get that result now because of less St so um and that's an internal s issue so the the bigger concern is well things just slow down and I do know from talking to friends that morale amongst government employees is down and frankly they're nervous and I understand why there's been a lot of talk with all the the chaos and uncertainty that a lot of businesses are choosing to hold off on plans to expand or you know invest Lauren there's a lot of there's a lot of um me the other side I I spoke with a friend this morning who and maybe this is what Trump wants and maybe this is a good thing who has been importing a lot of her products and now wants to quickly uh move to me in the USA just because of the amount of uncertainty around pricing and costing and freight and and stuff getting stuck in Customs for products coming from overseas so it's the uncertainty is frightening but if you're a good entrepreneur you also take the uncertainty and you find Opportunities around it I think you know almost every entrepreneur that is sourcing Goods overseas would like to manufacture uh in the US many believe that because of the cost of Labor or for whatever reason it's just not feasible um obviously the goal is to encourage more Manufacturing in the US and that would be great do you from your experience with clients are you sensing that there is this just one that you've talked to or do you see other examples of people that was just one I spoke yeah morning but the um but in princial um look change is hard okay and this is not easy and it there's no doubt it creates uncertainty and um a bunch of confusion there's no doubt about that but you it's not the first change we'll go through and my lips to God ears it won't be the last so you just have to from my perspective keep an even hand and just keep the trains running the the question I was going to ask you is given all that uncertainty there there's a lot of talk that businesses are reluctant to to take steps take action you're kind of on the front lines of that you see that every day we see the opposite L we like pre-election we um we were just struggling and now we can't keep up that was my question that's what I wanted to hear so you are not seeing people who are in the process of doing something pulling back and and shutting it down that's good news to the honest if you took a barometer of how again I'm always relating to say we are a leading economic indicator because I still think we're living through a trump bump right now and I'm not quite sure how long it's going to last but the um um but we uh we can't keep uper right now do do you have a sense of how far out that extends is that at every I have I have no idea see in financial services alarm um if we are a leading indicator sometimes like like moods can just change right and for whatever reason within a few weeks after the election our business just flipped and went crazy and I couldn't tell you exactly why could be different theories why because many of the fundamentals problems that businesses were encountering last year of the same um so I'm a little dubious about how long it will continue but so far we are cracking out loans and people are active and engaged and investing and interested there is also some Bottom Buying a little bit people are trying to take opportunities now to buy businesses cheaper things like I guess the question I was trying to ask was are you getting as many initial uh inquiries right now more more okay that's what I wanted to know that's a very good sign we should do we should do a better job at tracking all that data I mean it's somewhere but it my own senses were getting considerably more that's good news anything else you think business owners should be aware of at this point just focus on what you can control friends all right and that's easier said than done Lauren but I always look at it I go survive Co you can survive this Amy casar is founder and CEO of multifunding which helps businesses with their financing needs thanks for taking the time Amy my pleasure have a great week everybody [Music]