The SBA’s misguided loan simplification
To the editor:
Thank you for the informative article about the U.S. Small Business Administration’s efforts to provide more capital for the truly small businesses (“Getting loans into the hands of small business,” Aug. 8-21 NHBR).
This has been an underserved sector for a long time, and the lack of available funding has kept many small businesses in New Hampshire and beyond from starting and expanding and creating the jobs they have had the potential for.
While this overall was good news, we were very surprised by (SBA New England Administrator) Seth Goodall’s characterization of the loan simplification process intended to speed up the funding approval process. He wrote: “Along with this simplification, we’re eliminating requirements for time-consuming analysis of a company’s cash flow on small loans under $350,000, a step that can delay loan decisions.”
He must be crazy. There is actually no more important part of a comprehensive business strategy for any business, micro or larger, than the cash-flow forecast. If the business cannot generate the cash flows to sustain business spending, no matter how profitable, it will grind to a halt.
This is especially critical for a startup operation, where the principals typically do not give enough (often not any) consideration to the cash-lags that may accompany rapid growth.
We think that the SBA’s opinion that making SBA loans easier will help more entrepreneurs succeed certainly makes great press, but must conclude that ignoring the cash flows may, in fact, contribute to just the reverse – an increase in failures from entrepreneurs plowing ahead with poorly advised ventures.
The Knowledge Institute