Transcript of Telework Teleconference July 28, 2010
Strategies to Support Borrowers Success
With Welthy Soni-Myers

>> Good. Okay. We have Welthy and its a little bit after 2:00. I want to welcome everyone. We are coming around full circle to provide information about telework loads. We have been talking for the good part of the year on how to get the applications in the door and hopefully get them funded and loans out to people. Then what? We wanted to have something on what happens once you get the loan, you want to make sure at the bar where is successful in their new business or expansion of their business because we certainly don't want defaults. Welthy Soni-Myers, whom many of you met a couple back at the telework Forum has had much experience working, cajoling and helping individual borrowers once they have received their loan to become successful in their business. We are going to have her talking to us today. What happens after you give them alone? With that, I will turn it over to Welthy. I just have one more thing. If you need captioning, caption, Colorado is available on the other website which was available in the email and also if you want to mute your line, it is star six, took unmute you also use star six. Also, and going to step away for a minute and press the record so hold on just a minute. 
>> Are we ready? 
>> I don't know. It usually says record has joined the meeting. Hold on, let me do that again. 
>> Okay. There we go. Can everyone here me okay? 
>> Yes. 
>> Loud and clear. 
>> Everybody should have a slide in front of them that says so you have made the loan, what's next? Not something on a dark blue background. Somehow I sent the wrong PowerPoint out. If you are all on the same page with me, we can begin. I know all of you have been struggling to get loans out and I have been starting to use success stories about loans that are out so that is terrific. The question is getting the money back and making sure the new business is a successful business. Unfortunately, getting the loan out on the street is only the beginning of the relationship. That is step one. I used to tell our borrowers when I ran a program in southwest Virginia, you now have alone and I am now in bed with you until the loan is paid back. Basically, it is important that you stay close to the bar where and of course, there are some things about the loans that are really important. Number one is the third-party payments, whenever possible, are really a good idea and I don't know what kind of flexibility with you have - that you have with the telework loans. It is a lesson we learn the hard way. When we first started making loans, we started giving the people - giving people the amount that was approved in one lump sum. After some hard knocks, we realized that wasn't the best way to proceed and that was an invitation for some disasters and hard feelings and so forth. We moved to third-party payments whenever possible which means when someone is borrowing money for a piece of equipment, you make the check at to the vendors selling the equipment rather than giving it to the bar where. That makes sure that it goes for the right purposes. We found 95 percent of our borrowers were very responsible. There were some who hadn't seen the kind of money they're getting in alone, maybe ever in their lives or certainly not for a while, and all of a sudden getting this amount of money was something that seemed really nice that maybe they could spend a little bit of it. Not even on a business related expense, but not with the had come to us with the loan request for. Third-party payments are a good safe way to make sure the money is going for the purpose for which it is intended. 
>> A step alone is always helpful if you can possibly due that. Start with a smaller amount of money and let the bar or. [Indiscernible] That is certainly something again we learned on the school of hard knocks. I think it is important that you make the loan document to include a requirement that they send you a monthly PNL statement. It does a couple of things. If they have to Sandy their PNL, that means that have to have a PNL. 
>> This is Tony in Maryland I know what PNL is, but I'm not sure everyone else does. 
>> A profit and loss statement. You want them to be sure they are following the cash, nothing is more important to and new emerging Business and knowing per your cash is and this is a subtle way of knowing it is important for you to keep your eyes on the cash. Even if you make - theoretically, you can put into the loan document that if they do not give you a profit and loss statement every month that is a technical violation of the loan agreement and you can call the loan. It's probably not going to do that, but it's a little bit of a threat to make them understand how important it is that they keep good financial records. It's not mismanagement, but it is a financial blackness. It's probably the number one reason why new and emerging businesses fail. This is one way to get them in the habit [Indiscernible] or that they use the services of an accountant or something like that. That is critical. It is possible, ACH is the best way to get payments. They are expensive to set up, but it may not be something you can do. If you are doing the loan in conjunction with the bank, they certainly due ACH payment all the time and it may be something you can negotiate with the bank to have the payments taken right out of the business owners checking account that we don't have to rest and, they know the money is going to go out every month automatically and forces them to keep enough money in that account to make a payment. 
>> If you have to depend upon them to send a check every month, then you can get yourself in this situation of having to -. It isn't always possible to do that but if it is possible, it is a good way of doing it. It is easier for you and it takes a little bit of the friction out of the relationship because the minute you have made the loan and they owe you money, that changes the relationship. There's nothing like going somebody money to make the relationship a different one. The last thing is and loan disbursement form so when you get then the loan and they have submitted in their application and accounting of what they want this money for, it's very important that you insist that they fill out a loan disbursement form to show you exactly where the money has gone that you have paid in. If you can't do third-party payments, this is the next best thing. Insist in the first month they give to you a filled out form that says this is how we spent the money. Again, that is just to give you a sense that they are being responsible and it also says to them that this is money that is critical for the business and it's only for the business. We got it and really hard on this 11 time. We had given a young man and his wife a loan. We were doing a larger full disbursements and we learned from experience. When he came back to us with this loan disbursement form, we discovered he had taken 10 percent of the loan we have given him and tied it to his local church because you as critical to get the loan and we had to explain to him and that that was a great thing to do, but not with his borrowed money. It would be much better to do with money he earned and then he can't tie that the church. Any rate, this will give a sense of what this is about and how they are managing their money. Her Colonna's restart the relationship. After the loan, I know many of you are statewide so many of you are not going to visit the Business is easily. It would be great within a month for you or somebody on your staff or in the area, somebody to go and make a visit to that borrower in person if they have a business. Even if it is a business in their home, it is good to see how is set up. Is it in a secure location? Do they seem to have a good setup for the business? It just gives you a picture of how serious they are in running this business. 
>> It's also important to keep in touch. Call people, email them and ask them how that are doing. They owe you money so we want to stay involved, but you want to have a sympathetic ear. It is a double edged sword because they may not want to tell you about your problems and may not trust you that you're going to be hounding them for repayment. You may get a double sense or an intuitive sense of a problem. Is something going on? You just kind of have to stay in touch and let them know you are there to help and that is important. You don't want to have them all of a sudden say they can't pay you. Trying to build a relationship that is supportive and businesslike, but tells them you were there to be a resources to them. 
>> The business owner, what you want to do is get a sense of their strengths and weaknesses. You have probably done this before the loan, but then they are on their best behavior and now you want to figure out what it is that they are doing well, where they might need help, what is their real knowledge and experience of the business? Why did they start the business? The support system as you know is really important for everybody, certainly somebody with the disability U.S. Arctic gotten possible problems anyhow. Having a good support system, a bad support system can be the doom of the business. If the husband is not supportive of the wife or as people telling them they can't do it, then it's really difficult. It's really important that you listen for that support system and make sure they're getting that in to try to be as much of a support as you possibly can. 
>> Weaknesses. There is a gentleman who was the micro enterprise field -[Indiscernible]. He developed a program for economic development when he was working as an economic developer in Africa. He has got a lot of great ideas about working with small businesses and what small business owners need. He came up with the theory that there is a trinity of management which is marketing, technical skills and finance. His thesis is that probably nobody is equally good at all of these things. You've got people who are fantastic marketers. You have got people who are great technicians. They know their way I run a computer and they can do it in their sleep. Or there are people who are really good at finance or bad it finance. I would say Finance is the number one area where most people are not good. We don't teach finance and our schools. We don't really stress control over our financial lives. We are a nation that lives on credit. He says we can't expect a one person or two person business owner to help all of these skills. It almost never happens. What you need to do is to try to ascertain which area the business owner is strong in and where his weaknesses are. That is where you go and find the help for the business owner. Its marketing, then you find some people that are great marketers. Marketing, as we know, it is a science. Even if you are a small business, you have got to get the word out. You've got to get the customer to find you. All of our businesses are low-budget businesses. Finding out how to do low-cost marketing is even more difficult. That is a skill. Most of the businesses will have some technical skill with the business they are going to operate. Then of course, finance. Certainly in my experience, finance is the area where most people fall down. The message is that we know this about the individual so what are the going to do about it? What we are going to do is find people to help them with their particular needs. 
>> They're all kinds of people out there. There are mentors and there is the micro mentor that provides long-distance assistance. It matches people with coaches across the country by e-mail. That can be one very good resource. Small business development centers also often have good resources. They tend to want to work with the larger businesses, but if you push them, they will certainly help with a smaller businesses. They are up and down. It depends on the part of the country or the small Business Development center. That is part of their mission. Usually they have a financial or a marketing person. They certainly are a good resources. If you are in micro mentor Enterprise Program, many of them have business coaches that can provide assistance or they can direct you to experts in the area. All of these should be very low cost. You don't want to it at cost on to the cost of doing business, but trying to find volunteers who will provide assistance to the new business owner. Business coaches, many micro mentor enterprise programs have business coaches. Many of them contract with business coaches and you might be able to do the same thing. Forming peer networks is a valuable restores and the [Indiscernible] model is very successful in many parts of the world. We tend to not do it in this country. Finding appears to have started a new business or are in the same business that might be willing to help, particularly with things like marketing or production or technical help. Then of course, you can call upon professionals. It is possible to find pro bono assistance. In Virginia, we found there was a pro bono group of both lawyers and accountants in the state more than willing to assist nonprofit organizations that were working with new business owners. There were very happy to work with our business owners as well as our organizations. It could be you could find pro bono assistance and if it wasn't pro bono, they would do it at a reduced cost. There is nothing like a lawyer and an accountant to help a new business set up their legal forms and of course, set up their accounting system and make sure it is on the right track. Score is all over the country. They are a group of the recently retired people who still want to get back and depending upon where it is, a SCORE chapter can be a wealth of information and grade assistants. These are often people who have been around the block three or four times, who knows the way I run the business world who have connections and can help your business owner. SCORE can be extremely helpful. Often if they take on a case, they want to see it succeed and they're going to put a lot into it. You can usually find the SCORE chapter [Indiscernible]. Then of course, they're all volunteers. People who are in marketing, at in production and finance who have been in business and are not affiliated with any organization, but would like to help. It is just a question of finding them. It is getting your micro business owner to the right help is important. Of course, it's really important they understand why this help is important to them. What I have found is that a number of new businesses, there are two kinds of people we have worked with. One was a person who understood the in immensity of starting a new business and they were grateful for help at any stage of the game. The rich very up front about how their business was going and very open. The other category were people who were basically insecure. Well and had a good business idea, perhaps they really have a hard time asking for help. Sometimes it that ask for help, it was a sign that they were less than perfect that they didn't know what they're doing or the people will judge them or that people were putting into their business, all kinds of things like that. It's really important to know the person you're working with and figure out how to help them. 
>> The second category is the most difficult period we had some great relationships with people. We thought they would be in touch with us every other day and we thought we were being frank and open and in one case we had a couple we worked with for probably five years, out of the clear blue we get up bankruptcy notice, that they are going out of business and they never bother to come back to us to ask if we can refinance even though we have been a constantcontact. They were one of our success stories. It is important to keep on top of you and your working with and try to understand where they're coming from. 
>> Other types of support. Some of the more successful micro enterprise programs have started affinity groups. Right now, when you only have a few loans, you probably don't have enough [Indiscernible] for an affinity group. You may want to get the bar hours together, even if they are not geographically close, connect them by website or e-mailed because of course peers can be as helpful as anybody in terms of problem-solving, letting someone bent, bouncing ideas of of each other, if you're in a geographic area where you have three or four businesses together, they can send business to each other and that certainly works very well. 
>> As your borrower pool grows, starting some kind of affinity Group, even if it is a virtual one, it is a good idea because it gives them a network they can belong to and the peer group that is in the same boat they are in. Workshops and the Web and telecommunications Gibson's an opportunity to have virtual workshops if you can't get people physically into one place. That is giving them objective information you think several of the borrowers need in a nonthreatening manner because they're part of a group. Service clubs are often willing to help new businesses. Chambers of commerce, depending on the business, urging a new business to join their local chamber if it is not expensive is a good way to get their business same out there and get it into the community and start making connections they may need for the business. Church groups can be very helpful. They can help find customers. They can help advertise a business, particularly if it is the borrowers church. We have a borrower that started a small furniture store and everybody in the church was buying their furniture from this store. We did very well because it was all through the denomination of that particular church group. And providing an opportunity of on-line social networking. To give the new business owner support. Of course you can do that in so many different ways that the universe has changed in terms of how support can be delivered. I think those are really critical. 
>> Financial information. Again, Your hopefully going to get their P&L on a monthly basis. It is really important that they look at these and that you start looking at them, since you mostly have small amounts of loans, you can probably look at them all monthly. You want to start looking for trends. The first thing is nobody is going to make a profit right away. Nobody. It can go for a year and not make much money. That is the nature of a new business. They're probably going to be putting money back into the business. Are they putting money back into the inventory? Are they putting money back into their marketing? Are they doing a service or a virtual Service? Are they paying their loans? Are they paying all of their other bills to keep the business viable. All of that is important. You want to look at what kind of the owners draw they have. Are they taking out a realistic amount of money. You want them to take something out because it's important that they understand that the business can eventually make some money, but initially, there draw will be small. You want to make sure their bottom line stays as black as possible. 
>> What about original sales projections? Despite the fact of clash cash flow [Indiscernible] most new businesses don't do that. They estimate their expenses Hi, but that estimate their income hire or probably unrealistically high. Does the owner know where the money is? Are they looking at the cash flow. Along with the P&L, you may want to get a cash flow statement. Hopefully they're going to be doing cash businesses, but not business is collecting money from somebody. It is important to understand the cache is different. 
>> There are a lot of problems to look for. Are the undercapitalized and do they need more money? They don't want to ask for a lot of money and you don't want to give them a lot of money and then they are undercapitalized. If they are, you may need to have the discussion of other sources of capital or cutting back on whenever it is they're doing. The original projections were maybe not realistic. Do they seem to have a good grasp of financial management? What about the marketing plan? Are the reaching the people or the customers they thought they would? Do they seem to be created on how they're doing this? Are they using all the resources at their disposal? How is the marketing going? Is the production doing as well as they thought it would? As I said earlier, the personal problems are things that will often sink a business pretty fast. A child gets sick. All of a sudden mom is needed at home and she can't run the business any longer or even if it is a home-based business, she is distracted by taking the child to the doctor, attending to his needs or a parent or something, personal problems can't be a ship stinker pretty quickly and it can go down pretty fast. The sooner identified, the better. Nothing is worse than something going on for a couple of months and the business goes down the tubes. 
>> Course corrections. There are a bunch of things that can be done. You as the lender do have some things you can probably due. First of all, if they have run into some problems they didn't anticipate, maybe you can refinance. Many microprograms refinance customers many times. We had some we had refinanced five or six times. Change the terms, change the repayment plan, try to do what ever we could to make that business work. Refinancing is very real. With that, it is very possible you can defer payments for a period of months to help the business get back on its feet. You could do interest only for a few months to help the business get back on its feet. You can do a token amount of money every month. They are paying something, but nothing close to the interest. You suspend interest for a few months. There are a number of different things you can possibly due to get them more breathing room and at the same time, you want to get in a team of experts. What is that they need? How can we pull this business out? What are steps we can take? How should we go about it? All kinds of solutions are possible if you have got more than one head addressing the problem. The sooner you identify the problem, the better. Some new business owners are very up front and say, I thought I was going to do it this much in sales, but I didn't know the economy was going to crash. I didn't know my kid was going to get sick. I didn't know all of these things were going to happen. Then you say, what can we do? That is when you going to refinancing, the changing of the payment plan or what ever you can do. What you don't want to do is to let the business failed. You don't want to let alone fail. Your interest in the bottom line is the lone, but it's also the business. You want to find a graceful way for that person not to feel as if they are a failure. They have a way out that will be a dignified way out, even if it means the business is closing, you want to make them feel they gave it their best and they have fulfilled their obligations. That is important because you don't want to put failure on people who already feel defeated. Looking at ways to correct the course is important. 
>> Those are my thoughts. I know all of you listening on the phone right now, we've got about 15 minutes to share stories or have questions or comments or something you would like to add. 
>> Thanks, Welthy. If you want to unmute your phone, press star six. 
>> This is Melissa. One of the areas that we would have had, a troubled loan that would have been a challenge to pay off, ended up being part of a pass plan. As he made money that would impact his eligibility for pass plan, he was able to make over payments on the loan. As a result, of a lot of intervention with the Social Security Work incentive person and us, he was able to save the loan and get it paid off. A lot of it was because he had the past plan. Unfortunately, we don't have a lot of opportunity to use the pass plan because its so specified you have to fall into a narrow light to have it work for you. As people are trying to refinance, it helps with the income, but it's not enough to sustain their business, they may want to look to try to fight if that person would be eligible for a pass plan. Those payments can be then set aside. It is a real challenge. It did help this one person. 
>> That's great. Thank you. 
>> It's not easy to pull off as you pointed out. Any at the comments or questions or stories to share? 
>> It sounds like most all of you have loans that are doing pretty good. Is that where we are now? 
>> What is the average loan size for most programs right now? 
>> In Oklahoma, we only have a total of four active loans across the state and the time frame. 
>> What size loans are those? 
>> They vary from 835,000 - $835,000 - $835 to $51,000. 
>> This is Nancy, we are starting to look at the fiscal year 2009 data for telework and it looks like 40 percent of all loans are between $1000 and $5000. Most of them are smaller. 
>> Of course, obviously the smaller the loans, the radical, the easier the repayment. I often suspect they are things like computers for people to get into a home-based business and things of that nature or special adaptive equipment to help them with the business. That makes it somewhat easier in terms of repayment. 
>> There was an interesting article about peer lending I think it was in Newsweek or Time . I guess New York and maybe in Chicago and Miami, several cities where there is a large immigrant population and they've had something like 3500 loans in the past few years. They are very small loans to only peer group lending which is a chorus, a whole other way of providing loans and certainly not very possible in terms of the population you are serving that are geographically distant from each other. The peer network business is I think a good one. Putting people in touch with other people that are in the same business formation process, even if you do it virtually is really a good idea. 
>> This is Nancy, I do think that is an area where the loan programs could maybe exploit a bit more. Some of these there were social media ways of getting them to connect to one another. 
>> Absolutely. 
>> This is Shelly in Virginia. We are on Facebook. 
>> So is Maryland. 
>> Do you had borrowers on Facebook with you? 
>> It is only been about a month. 
>> It does take a while for people to get into the swing and using it. People are not overly comfortable, like me. 
>> Welthy, I went to let you know I was able to get down to the four Micro Center's last week. 
>> Terrific. That's great. You went to people? 
>> The one Pulaski, downtown Stanton and one in Roanoke. They were excited to get to know us and know about our program. 
>> That's wonderful. Keep after them. 
>> Do we have any other comments or any stories anyone would like to share in terms of how their loans are going or some strategies they had used to keep things afloat, or wished they had a? - wished they had? 
>> Welthy, you have given us some wonderful ideas. I myself like that disbursement one. Welthy has given her contact information. If you have any questions, feel free to contact her. This particular teleconference will be up on the Web pretty soon. If you want to review it, you're certainly welcome. Thank you everyone for coming. I hope everyone is having a good summer and making those contacts with the loans. Any other final comments? Okay, thank you again Welthy. We appreciate it. Take care everybody and had a good rest of the week. [Event Concluded]