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The small and mid-size business sector has been largely ignored by the Troubled Assets Recovery Program (TARP), bailout or stimulus plans and by corporate America. Perhaps most disconcerting, banks and financial institutions, recipients of bailout funds, have not shown a pattern of loosened credit standards to make funds available to small and middle market businesses.

The assumption that the TARP funds would be utilized to increase credit to consumers and businesses has proven to be false. This is not to say that there have not been commitments to reach out to small and local businesses. In fact there have been commitments to open the doors to small businesses. When these commitments are examined closely, surprisingly there is scant evidence of substantive modifications to standard operating procedures. Non-profit economic development centers, state or local governments, philanthropic concerns and advocacy groups have not coalesced to build new paradigms to realistically address the current economic national and international realities for small and local businesses.

Interestingly, the commitments by financial institutions have been to seek small or middle-market businesses with a pristine credit record, low debt ratios in a market not impacted by the economic downturn. What does this mean in real world terms?  Risk adverse financial institutions are revoking or reducing business credit lines. These actions are being taken regardless of an on-time payment history or the status of a customer of long standing. The reduction in payroll taxes will have little impact on the survivability of small and local businesses. For most of these businesses the lack of access to or reduction of credit significantly reduce the chances of survival.

As a result of centralized loan/credit processing and “low cost” computerized small business lending models, most local bankers do not have the discretionary decision making authority nor the flexibility required to get the funds out to those small and mid-size businesses. The Federal government’s advocacy unit for small business, SBA, has not taken a position of greater flexibility for SBA guaranteed loans.

To assist, stimulate and sustain local businesses, especially small businesses, requires new lending models and a hard look at innovative approaches for credit underwriting standards. For businesses in trouble, techniques utilized in crisis management and turnaround, and restructure and reorganization need to be applied.  Professionals who have expertise with the particular issues and viable solutions for small businesses are best able to handle the application of crisis management and turnaround processes.

Some problems are too large and complex for individual owners to handle. There must be an engagement of new models and acknowledgment that standard operating policy by banks to reduce risk through methodologies that tightens credit standards is not acceptable.

Perhaps the best way to view the best approach is by indicating what should not be done.

1. Do not avoid or delay making the time to take a hard look at the revenue picture for the next six months.  If things look bleak do not wait to find assistance to put in action-calculated reductions.

2. Do not exhaust all personal and family assets in an attempt to save the business. Though the temptation is great, it is not wise to deplete savings, retirement funds, college funds, and life insurance policies. There are forces in these difficult economic times that you cannot control and you have to assure sufficient resources for basic survival.

3. If to continue operations requires consideration of exhausting of personal and family assets, change the processes of a calculated reduction to a calculated shutdown.

4. Under no circumstances avoid sharing the financial reality of the business with your family (especially with your children) and friends. If you can’t admit financial distress to those that love you, it is impossible for you to effectively address your problems.

5. Do not bid any jobs that are not at least break even. It is tempting to do anything to get the “contract/work” but this approach is always suicidal. You should be able to choose your charities.

6. Do not allow conventional wisdom to be your guide in seeking professional help. Make every effort to find a turnaround specialist who will agree to work with your business for a reduced rate. Make certain that you are working with a true turnaround specialist. The skills of a turnaround specialist are very different than a management consultant, accountant, attorney, or business expert.

7. Do not shy away from consulting with a bankruptcy attorney, even if you do not intend to file bankruptcy. It is worth the cost of the consultation to understand your options. The changes in the bankruptcy laws have limited the benefits of formal bankruptcy filing and for most small businesses the legal and accounting costs are prohibitive for reorganization in bankruptcy. This being said, it remains wise to consult a bankruptcy attorney.

The governing board of the California African American Political and Economic Institute (CAAPEI- Professor David L Horne, Ph.D., executive director), has brainstormed and identified many of the problems facing the businesses in the minority communities of the this nation.
CAAPEI has yet to find institutional support for a collaborative effort to address even the issue of assuring the participation of small and local businesses in the contracts that will result in the infrastructure funding part of the Stimulus package. Where is the commitment to convene a forum that would concretely address solutions for the economic resurgence that viable small and local businesses represent?

I am a relentless optimistic. A believer in making a way out of no way. But even I have come to the conclusion that those in decision-making positions have no clue how to address the problems of distressed small businesses. Exceptional individuals like Dr. Philip Borden, arguably one of the best minds and innovative thinkers on small business credit and access to capital solutions in this country and a trailblazer in credit and financing issues for small business, embodies the type of thinking required to provide workable solutions.

Tough Times Tip:  It is important to remember that debtors’ prisons do not exist in America. One must keep faith and perspective.  Since you were strong enough to be an entrepreneur, with a calculated plan you are strong enough to survive Tough Times.

– Dr. B. J. Hawkins, President and CEO of OFSTM The Business Doctors, is a business growth and turnaround specialist. She can be reached by e-mail at