EXCLUSIVE: Seeking a SBA loan? Hope you aren’t in a hurry

| 7/2/2009

Before the economic “tsunami,” as OOIDA member Russ Iund refers to the recession that has crippled his business, he was living the American dream.

Iund’s small flatbed trucking company in Chehalis, WA, was doing well. Work was plentiful, and over the years he had managed to build up his fleet to 12 trucks – with all but one paid for.

But then diesel hit nearly $5 per gallon in July 2008 and his fuel bills were running him nearly $10,000 a day to keep all of his trucks moving, even with the 175-gallon-per-day fueling limit he had to impose on his drivers. Unable to keep up with the $50,000-per-week fuel bills for long, he was forced to lay off some of his drivers.

A year later, Iund said while he has seen a “spark” in the past few weeks that business is coming back, it may be too late to save his small trucking company. That’s because the renewal license fees are due on his fleet, which is down to five trucks, and he doesn’t have the money to pay the approximately $12,500 that he owes to keep them going.

Encouraged by a workshop he attended in May on a new emergency loan program through the U.S. Small Business Administration, he checked into an America’s Recovery Capital, or ARC, loan to help pay the licensing fees so he can keep his trucking business running. These ARC loans are $35,000 interest-free loans designed to give small businesses some much-needed breathing room to stay afloat.

In early June, Iund submitted his paperwork to the Washington Business Bank, an SBA-backed lender, weeks before the SBA officially rolled out the program in hopes of being “first in line” for when the money became available. And when the SBA announced the program was “open for business,” Iund’s paperwork was processed with the promise that he would hear back from the SBA within 48 hours.

The lender who handled his paperwork told him the money was “going to go fast.” Although Iund has heard back from the bank that he may qualify, as of press time he was waiting for a final decision. He said his hopes of getting the money he needs to stay in business dwindles “a little more every day.”

“So the reality I am facing is that I am looking at laying off the rest of my people. All of those people have kids, and those kids are relying on their daddies to make a good choice. And they chose me,” Iund told Land Line in late June. “And now, I feel like I am failing them. I want to keep them going. I have tried everything to make that happen, but this all might be coming to an end for us in a few days.”

Washington state truckers organize
In May, OOIDA members Bob and Sherrie Bond of Chehalis, WA, had the idea of putting together an event to bring truckers in their home state together with local SBA loan professionals and lenders.

Sherrie said the event was designed to educate truckers, as well as the SBA, about the economic challenges the trucking industry faces and to find out what money might be available to them.

Rick Sedy of Castle Rock, WA, was one of the truckers who attended the SBA workshop.

At one time, Sedy had 15 drivers in his small log-hauling business. But then record-high fuel prices were followed by a recession that devastated both the timber industry and his livelihood. He was forced to let everyone go.

Sedy said in mid-June when the SBA announced it would be accepting applications for ARC loans, he sat down at his computer and filled out the paperwork online. As of press time, Sedy was still waiting for news. 

“It’s so frustrating for me to hear that there is this money available to help some businesses, but not mine,” Sedy told Land Line.

The day the ARC loans were announced, Mike Phelps from Cathlamet, WA, went online to apply. He has yet to hear anything back.

Phelps, who was recently injured in a logging accident, applied for the loan after being off work for three months after undergoing five shoulder surgeries. He and his wife are currently without a personal vehicle. He was forced to sell his old pickup truck to make his house payment last month.

With medical bills piling up and the only source of income being his truck, he said he could use the ARC loan money to pay off his mounting fuel and tire bills.

“I love what I do. I just want to work and do what I love, but at this point I am running out of options,” Phelps told Land Line recently.

In early July, Washington state Rep. Dean Takko, D-19th Dist., participated in an economic development meeting with U.S. Sen. Maria Cantwell, D-WA. In an e-mail forwarded to Land Line, Takko said it “sounds like no one is getting those loans as the banks are not participating.”

Cantwell, who sits on the U.S. Senate Committee on Small Businesses and Entrepreneurship, told Takko in the meeting that she was “unaware that loans were not being made and would look into it.”

What does the SBA have to say?
The majority of small-business truckers who are interested in these ARC loans are worried they can’t compete for them. That’s because the SBA defines small businesses as having 500 or fewer employees and small-business trucking companies as having revenue of $25.5 million or less.

Land Line contacted the SBA and officials in the SBA offices in Seattle and Olympia, WA, who met with truckers about the ARC loans. They had differing explanations about why these truckers haven’t heard back from the SBA.

SBA spokesman Michael Stamler said he won’t have an official list of ARC loan participants until they start lending, and some lenders are “still considering the program and need time to get their systems in place to begin offering and processing loans.”

“A lot of lenders are on the fence and haven’t decided whether they will participate or not,” Stamler wrote in an e-mail to Land Line. “Other lenders are gearing up to make ARC loans, but haven’t announced it yet because they don’t want to be inundated with more calls than they are equipped to handle.”

When Land Line interviewed Stamler in May, he said he wasn’t sure small-business truckers would even qualify for ARC loans because the SBA sees them as “mobile businesses,” and the money could only be used for “stationary fixed assets like land, building, machinery and equipment.”

However, Frank Tomecek, a Certified Public Accountant for OOIDA, told Land Line that any piece of equipment with a “usable life” of a year or more is considered by the Internal Revenue Service to be a fixed asset, which includes both permanent – or real property – and movable – or personal property. Tomecek said the definition of a fixed asset has never been tied to whether a piece of equipment can move or not.

“In fact, the SBA’s inclusion of machinery and equipment as an example of stationary fixed assets could be contradictory,” he said.

When Tomecek read through the requirements for the ARC loans, he said he didn’t find any reference to required “collateral, fixed assets or otherwise” to qualify. But the final decision appears to rest with the actual lender or local bank, which is sometimes reluctant to loan to certain types of businesses.

Stamler said the best advice for truckers interested in the ARC loans is “to go to the bank where they commonly do their banking business, and if they aren’t making these loans (for truckers) to keep in touch with the SBA district office in their area for updates.”

All of the Washington state truckers Land Line spoke to are already following that advice.

Nancy Porzio, director of the SBA’s Seattle District office, who steered the meeting with small-business truckers in Chehalis, said there could be a couple of reasons for the response time.

“It is possible that SBA has not seen the package yet, that it is still with the bank for processing,” she wrote in an e-mail.

The lack of response to SBA requests may also mean that their bank is not a “preferred lender,” which means the response time will be slower than for a preferred lender who can provide a “quicker response.” 

However, as Stamler stated earlier, there is no official list yet for those that are preferred lenders for the ARC loans.

While Stamler said the SBA is encouraged by the participation they’ve had in the information sessions, he said he feels the SBA will “continue to see a ramp up in the coming weeks, not only in lender participation, but also in the number of loans being approved.”

For Russ Iund, this “ramp up” in loan activity may come too late to help him and his four remaining drivers and their families.

– By Clarissa Kell-Holland, staff writer