Small-Business Owners Facing Debt Secured with Personal Guarantees

well welcome facebook live viewers my name is brad botes and we are joining us again this week um this is our continuing facebook live series where we try to educate our viewers and inform our viewers on uh things that are impacting the the folks that we serve at bond and botes our law offices are spread throughout alabama we’re in mississippi and we’re in the uh knoxville tennessee area and we help people with money problems and we know that plenty of you are having financial problems right now this last year has been tough so we just want to we want to be here to answer questions and address some of the issues that are that are uh being faced by a lot of our our viewers uh please remember again that the bond and botes law offices are situated throughout alabama we’re in mississippi we’re in the knoxville area in tennessee and help people with money problems if at this point you need some advice you just need someone to talk to we’re offering absolutely free initial consultations with an experienced attorney and we’ll do it you know like we’re doing this facebook live today we’ll do it from the comfort of your own home office or uh home or office wherever wherever you feel comfortable so please we are ahead good friend um a senior vice president with south point bank here in birmingham derek johnson derek and i have not only been good friends for a long time derek and i have served together on the board of the crisis center here in birmingham and at one point in the in the distant past derek was my banker um derek welcome to our broadcast today thanks for joining us

thanks for having me brad happy to provide any help i can well thank you um if you would just share a little bit about your background and your experience with our viewers um i’d appreciate that

yeah i know i’ve i’ve been doing this i guess about 15 years now i was at compass bank for about 10 years i was service first bank when it was formed i guess for about nine years and now i’ve moved over to south point bank to run their private banking department um i always joke there’s very few things that i have not seen at this point um it has been a roller coaster for the last 10 years i think for for bankers and borrowers well it certainly has been um and i can say i’ve been helping people with money issues for over 30 years and i can say that with everything i’ve seen this last year has been a far different than anything up until that time this coed pandemic has really i’m sure created a big shift for not only how you work but the type issues you’re seeing and and those are the things that i’d like to to talk with you about so for our viewers i want to remind you these facebook live episodes live on our facebook page i think you’re going to hear some very valuable information from derek today we’re going to talk about the impact of covet on small businesses and particularly the individuals that have guaranteed the debt of small businesses so if you know somebody that you think could benefit from this remember that this this feed will live on our facebook page and at the bottom botus website feel free to refer folks back to here last week we had a very interesting episode we talked about the eviction moratoriums that are in place and a lot of the foreclosure uh moratoriums that exist but that will be expiring soon and uh you might also find that episode interesting but i have my friend derek johnson here today and derek what i want to talk about is the impact i think that this pandemic has had on small businesses in particular you and i both know that um in many cases when you’re dealing with a small business you’re really dealing with the principles of that small business um that’s right

as an attorney i often hear people say well i i incorporated or i’ve i you know set up an llc so that that protects me personally and i can tell people that you are certainly protected from certain types of liability when you incorporate or when you set up some sort of business entity but when you’re getting started or when your business is is young there are very few people that are going to lend you money or lend your business money unless you sign a personal guarantee

derek would you say that you see a disproportionate impact upon small business owners and their principals um uh or have seen a disproportionate impact over the last year

oh absolutely brad and you know the trick on this is is that you know until you have a very very very established business banks are going to look to your personal financial statement first you know that you can come in with the best idea in the world and we can all agree it’s probably going to make money but if i can’t see it on your financials there’s no way that one’s going to go forward your options would be to go to sba that would probably be a better option on startups but if you come to the bank looking for a small business loan i’m going to look at your personal financials make sure that if this goes bad that you have the other abilities to pay it off and and you’re not alone at south point bank and you’ve worked with a couple of other banks um i can tell our viewers that uh even though i’ve been doing business for over 30 years now we’ve been working with people my law firm’s been around for a long time there are still many instances where we’re asked to personally guarantee obligations um so derek would you tell us a little bit um in very basic terms how that works what it means when an individual or or individ individuals guarantee the debt of a business

yeah and there’s a couple terms that always come up that i think people really need to be familiar with when you’re asked to sign a guarantee um what we call is it basically if the loan is not as strong as a bank would be we’re always looking for something called an unlimited guarantee it may be listed as a joint several guarantee but it allows the bank to approach any member of the llc or business to go okay you’ve got five members and one guy is super strong the bank is going to go to the strongest person in that first i mean that that’s it’s written in the document they don’t have to go after you proportionately the bank can can go after the strongest person in that list so you really have to be careful but most that most banks

you have to have a credit that’s so strong to get a limited guarantee and even if you do get a limited gear you say you’re 25 owner um most of the time they’re going to add a percentage on that too to where you’re you guarantee 1.35 1.45 of that ownership percentage too so you’re not just limited to your ownership percentage when those documents are drawn for your companies you know that’s going to involve side litigation in between you and your partners but the position’s always going to be y’all fight that out amongst yourself we’re going to get our money and then y’all can go back and sue each other to recover from each other yeah that’s a very important thing a lot of people that i counsel with that they say well i only have a 10 percent interest in the business so they can only hold me responsible for ten percent of the debt uh that that term it’s it’s a legal term but joint and several liability it means that everybody that signs a a general type guarantee which is what we’re going to see in most instances is liable for everything everything that you know the business all obligations that they’re guaranteed for the business um so you may end up being responsible in paying all that debt you may have rights against the other shareholders or other members of the llc later but the bank isn’t concerned with those agreements between the shareholders the bank’s going to go like you say whoever has the money yeah it’s you have to be really careful i mean i i i i’ve been feeling you’ve probably done some of these and i have too but you know a lot of times when somebody comes to ask you to guarantee their debt that credit’s not strong enough to stand on its own so if they come to you and say hey i want you to guaran help guarantee my debt they have basically put the crosshairs on you because when they bring you in as a help the bank’s looking at it as okay well if it goes bad i’ve got that guy i have that person with a strong balance sheet that we can approach to get paid and a lot of times we we’re never gonna attempting to go after the owners of the business we’re going after the guy who said he would write a check for it if it doesn’t go right you know and i will tell and i have told our viewers before you know if you have a good friend and you want to destroy that friendship then then think about guaranteeing a financial obligation for them um people have good intentions

well you know and i think you’ll enjoy this too is that we always joke that every lawyer and every doctor in town has one restaurant inside of them you know they’re going to get talked into one restaurant or something like that and they only do it one time because it always goes bad and they haven’t arrived to check for it so yeah being geared towards is not all it’s cracked up for me unless you’re getting paid for it i’m half greek derek and i can tell you that the greek folks that i know are heavily into the restaurant business but uh i went to law school for a reason i love those people and i love their restaurants but i’m not getting into the restaurant business oh man right and i think we always joke too that say you know if somebody um i don’t come to your office and ask you how to and tell you how to perform law i’m definitely getting into a restaurant where i go i’m a banker and then i try to tell people in their restaurant that’s right let’s let’s all stay in our lanes so derek one thing i want to make sure we cover here we’re talking to small business owners people involved with small businesses many of them have personally guaranteed their obligations but during the last year the government has made available some programs to assist small businesses specifically the ppp loans which are payroll protection program loans can you explain to us how those work and what you’re seeing with respect to those loans becoming forgiven at this time how that how this program’s developed well you know this was this was a pretty dark time for all of us last year um i i was actually out on leave um but i was sitting at the house doing pdp loans and you know the the worst part about those were that you know the big banks had a portal into where they could go in and get their biggest clients the most money is they possibly could the fastest but all the smaller guys like us the smaller banks the smaller borrowers if you didn’t have a direct line into a banker you’re the last of the list you know they’ve made changes to that program to where it’s much easier to get those loans now but it was it was pretty bad that that first round a lot of people who really needed it were not able to get them i think that’s gotten a lot better but it was pretty scary you know that those loans they were intended to get people through and keep people on the payrolls um a lot of people have done the right thing with those loans what we are seeing now as people start trying to come to get forgiveness is they did not keep good records they did not keep good payroll records they did not keep um all the other documentation you know if people had good accountants that that was great you know you have to be a certain size business to have a really good accountant though a lot of people are just doing books and trying to come back and try to pull that documentation and it has not worked great um we’re kind of coaching those people through that right now and we have had very few people who are not forgiven we’ve had to work to get them done but the scary part is on some of those a lot of people did some really bad things with that money you know that if you if you went and bought a car or something like that that is getting looked at very very tough right now um so i i’m i’m interested to see what it’s going to look like in the next couple months but i have a feeling we’re going to start seeing a lot of enforcement on some of those things but we’ve had good luck with it man we tried to stay with people we knew we didn’t just pick up every person that came to the bank asking for one um so we tried to keep our borrowers people that we knew and they’ve all pretty much handled it well well yeah i i can tell you uh i tell our viewers um with something like this it’s good to know a banker it’s good to have relationship with a banker um and i can’t say enough good things about derek johnson absolutely south point bank um if you need some assistance in this area derek is certainly in south point is is certainly the place somebody that you want to talk to so so the general concept of these ppp loans uh is that they weren’t going to be loans at all it was money that was going to be lent to businesses primarily so that they could keep their employees through a time that we expected earnings to be down and they certainly have been for most businesses over the last year um but you applied for the loan now these are loans derek as i understand it there were no personal guarantees required for these type loans is that is that essentially correct uh that that is technically correct but you the the catch was you were certifying as the owner of the business you you didn’t have your personal guarantee but by attaching your name to it and going i certified these documents to be correct you have opened yourself up for liability you know if you sign something knowing that it wasn’t it wasn’t going to be used for payroll it’s as good as a personal guarantee that they will come to you directly but as long as you use the money for the intended purposes and and did the appropriate records um then the the debt was usually made to the business entity the corporation or the llc but you make a good point um those of us that took out those loans had to make certain certifications and if those weren’t accurate i’m sure the sba would look to do the business owners themselves to the principal yeah they will that’s right and you know some of the stuff that we’re seeing people are getting called on some of that is is you know they’ve got a neighbor who sees them driving around in a in a new car and they’re basically blowing the whistle on those people so the ones who are getting caught doing bad things it’s really requiring a certain level of just really not caring they just really did it knowing that it was bad and they’d probably get their just desserts sure so so the next step was you applied for the loan hopefully the loan was funded you made certain certifications hopefully you used the money properly and and you kept good records you then the government opened up a period of time in which you could apply for forgiveness of the loan but just just as with the alone origination the forgiveness is handled essentially by by the banks themselves is is that how it’s working

yes sir that’s correct um you know i it really was a strange situation because this was rolled out so fast that the guidance given to bankers was that you will do these as fast as you possibly can but when it comes down to answering questions or how do i fill this out we had to basically go that’s you talk to your accountant you’re someone who can bless this um but now of course it’s come to the forgiveness time and we’re having to play coach to a lot of that we have we’ve got sba guys that work directly for us which has made it so much easier um right that’s all they do all day long is that they deal with sba loans and they deal with this ppp stuff so they are experts they know exactly how to do it and it’s been great to just pass that along to them and go hey please help these people because that was not that the bankers who were entering them we had no idea how it’s going to work out and honestly the the way it has rolled out with the government has been very disappointing yeah we were told a lot of things about how this was going to go and if it wasn’t forgiven how it would help be handled and a lot of it is just now they’re going well it stays on books for 10 years and that’s not good for us with capital requirements sure yeah they they they tried to do this very quickly and whenever uh whenever something’s done quickly and often often mistakes are made you know i i think it gets back to what you just said it ties back to our topic of personal guarantees and that business owner certification but people are applying for the forgiveness right now and they found that if their loan was under 150 000 it’s a fairly simplified process but the important thing is they’ve still have the documents to back that up

right and you know our our portal we have we have an online portal basically says these are the documents we have and it’s really is it’s a tick mark they’re going down and going okay you have this document this document this document based on the short form and the small loan amount you’ll get forgiven but the ones above 150 000 get real tricky real fast and even if you’re below 150 at some point somebody could come and say show us those documents um and if they don’t exist then that principle is going to have some liability

i would suspect you know i keep coming back to the amount of people that work for the irs right now they are so understaffed that just the thought of having them go to try to figure out all the 150 000 loans i mean it’s it’s a very small chance not saying it can’t happen but you’d have to really do something crazy for them to come after you on those hundred fifties yeah well uh all all the same i would encourage people to be very careful and if you if you are filling out those forgiveness applications make sure you can back them up make sure you have your records again that’s why you’re doing business as an llc or a corporation you want to make sure that you can escape any type of personal responsibility by making sure all of your documents are in order so we’ve had essentially two draws now ppp i i refer to them as ppp1 and ppp2 what is your expectation as a banker is that it or will we see another round of similar type loans brad i’d be very surprised i mean i i really would you know look at the [ __ ] they’ve already provided my understanding is all that has not even been spent yet um i would be shocked to see a around three uh especially as you know as fast as everything simply getting back online i i would doubt it i really wouldn’t yeah i think the the government has has pumped out so much money through both assistance to businesses and individuals i think at some point those are going to stop and i encourage you know again folks out there listening if you’ve been getting by with this type help and your business your finances are still not good it’s time to reach out and talk to somebody with experience a good attorney that that can provide you with information as to how to proceed with your financial challenges so there the the other thing i’m seeing right now and i imagine you see some is just like with individuals there are what i would refer to as predatory type lenders out there that cater to the business community we have folks to come in to see us and that they no longer own their accounts receivable are you seeing some of this with with the people that you work with right now

i am um asset based lending is it’s pretty difficult for smaller banks to do right now just because the amount of time monitoring that takes to fund things we’ve got a couple but they’re they’re very good clients but most of those guys now get pushed out to what they call factoring companies um and those i’m glad you said it’s predatory because you know those i said those work yeah that wasn’t saying i’m glad you said it i didn’t but you know i don’t uh i don’t disagree with you i mean some of the the ways they make you report and then the terms they pay you on you’re almost set up to fail i mean it you have it has to be desperation before you ever go okay i’m going to use a factoring company um usually it’s putting a bad date on something that’s already kind of bleeding anyway um but for some people there’s just another option i mean i i i think you and i talked about this before too is that you know people with smaller businesses just there’s just no good options i mean even if you said you’re gonna do an sba loan sba loan can take months to finally get going and banks are set up in a way where they get they’re not betting they’re not betting on any any loans that have a possibility of going back yeah i i really want to emphasize this to um folks out there that are running small businesses you know you fall in love with your business and you want to do everything you can to make it work but if you’re at that point where you’re looking at factoring your receivables working with one of these companies it’s going to charge you a very high interest rate um almost always are going to ask for a personal guarantee you know be very very careful it might be time to throw in the cards on that business before you dig the hole deeper derek in my experience some of the things i’ve seen these companies do in addition to the very high interest rates in addition to the personal guarantees these businesses in their loan documentation will have the individual that’s guaranteed the loan um make what’s called a a um there’s a term that’s used this is allowed in new york essentially a surrender of judgment so that if i let borrow money or guarantee a debt on one of these loans from a company that’s up in new york they don’t have to go through the process of suing me and having me serve with the summons the loan documents i’ve already agreed that if they sue me i’m served and they can take a judgment against me immediately and where that comes into play our viewers out there well why am i worried about a judgment being taken against me in new york don’t they have to bring that here to alabama or mississippi and tennessee in order to collect on that judgment most banks that you do business with have some sort of connection with new york now i don’t know if southpointe does but i know the larger banks have a connection with new york and that’s sufficient people have their bank accounts garnished based upon a judgment up in new york that they knew nothing about so so these loans are very very dangerous they subject the individuals the principals uh the people behind the business the liability and i’d caution you about getting involved with those derek i want to take just a a short break here to remind our viewers that this is the bond and botes facebook live we do these every wednesday at one o’clock p.m central standard time and we try to have an interesting guest as we do this week for you with each episode many of you are involved with small businesses or you know somebody that’s involved with a small business and these facebook episodes live on our facebook page and on our firm’s website about invotus.com if you want to refer someone back to hear what derricks had to said today i encourage you to do so man last week we had a special guest uh that helped us talk about the eviction and foreclosure moratoriums and the soon to be expiration of those type moratoriums uh we are offering absolutely free initial consultations right now if you see financial problems on the horizon don’t wait until it’s too late don’t wait until you’re already being garnished or facing a foreclosure or repossession reach out for help now derek we’ve had some questions come in from some of our viewers and i wanted to give you a chance to address some of these so the first one has to do with those ppp loans um what happens okay if i apply for forgiveness and the forgiveness is denied what happens next what’s going to happen to me well there it there is an appeal process most people don’t win them um but but it it it is there and it at least could delay the the payment for a while um if you do get to the point where it is not forgiven luckily it’s at a one percent rate um it’s still backed by the government so the banks are gonna have to work with you you know the the government’s gonna have to they basically said to the banks you know if this goes bad we’re still going to cover the banks only anything that’s not paid off most of the time those are going to be termed out over five years it’d be it’d be like a short car loan so you know if you take a 25 30 000 dead out that can still be pretty heavy on you know a payment of every month for 60 months i mean i could probably figure out what that payment would be for you but it can be pretty aggressive um a lot of times it was before if the one was taken out before june 1st last year i think those actually have a two-year payback period so that would be even even worse but a lot of those are getting pushed back into the new five-year payback program so the answer like so many things in addition you know the advice derek has is don’t get into that situation make sure you keep your documents in order make sure you can show that the money was used for the appropriate purposes and if your loan was under 150 000 um the the forgiveness application the application for forgiveness processes is fairly simple well another part that would we advise people when they took those loans out to have the check and account where those loans were don’t take a loan from the bank and then move those funds into another bank’s checking account because at least if it’s in my house and you’re looking for documentation i can go okay well this i can pull all the copies of checks i can pull everything from here and say okay here’s here’s a large part of your documentation if it’s another bank that does not have to loan but they have your checking account i mean you’re hoping that they’ll get back to you in a timely manner but it’s in the bank’s best interest where you have loans to get it forgiven because we want it off our books as fast as you do and i you know another excellent point derek made earlier with respect to this is this is one of those times having a good account you know if you’re going to operate and run a business having a good account is just very very important i know a lot of people use something like quickbooks at the beginning but after having run my own business for 30 plus years i can assure people the cost of a good accountant is well worth it in so many instances and this is one of them um i have a viewer here that asked if i personally guaranteed a loan with a bank and i default on the loan can the bank take my home

it’s a good question um and that’s actually gonna be one that i’m gonna throw back to you because if you do not pledge your house on a bank loan i can’t come back to your house i can see you and you know which may force you into bankruptcy which is then going to have mr focus representing you on it and then they’re going to go well on the payback how much of your how much equity do you have in your house that could be used to help pay back your debts but i would let you speak more to that about once it actually gets to the part of hey we’re in active litigation and what the what the bank’s rights are on coming for your house but i ca i can’t go after it it’s not pledged sure and i’ll elaborate

folks would think well i’m a bankruptcy attorney derek’s a banker that we would always be in an opposing situation and that’s not the case it’s in everyone’s best interest usually and it’s in everybody’s best interest to try to work through these type issues before you get to the point where where you might face losing your home and and we often are able to work together very effectively but the legal end of this is yes if you personally guarantee a debt and the business defaults what’s going to happen next is that the bank or whoever lent the money is going to take legal action against the guarantors this is similar to defaulting on a car loan this is similar to defaulting on a credit card the bank will sue and they will obtain a judgment against that individual that guaranteed the loan now the judgment can then be recorded against any real estate or any property that the individual owns each state allows you to exempt or protect a certain amount of property but when that judgment is recorded it becomes a lien against your property similar to a mortgage which means that at some point when the house is sold or auctioned off those monies are going to be used to pay off that judgment it’s important again to consult with a good qualified bankruptcy attorney well before that happens there are things that can be done again the attorney can work with the banker i tried to create repayback terms perhaps negotiate some sort of resolution of the matter but you want to act before judgments start getting lined up and recorded against your property in the long run yes that the lender could theoretically take your home because they could obtain a judgment record that judgment and then execute it on the judgment which means forcing your property to be sold but there are many things that can be done in the interim so i encourage you to seek good competent advice before you get to that point um so um another another thing i wanted to add to that too is that you know when when you have a commercial loan that is teetering on going bad um that’s all like you said that’s a good time to go ahead and be talking to your representation because if you come back to the bank and go hey my business is struggling i need to look at getting my line i default modified i need to get some better terms the first thing they’re going to ask you is okay what else do you have yeah your business has doesn’t have a lot of worth right now so what do you have do you have other cash accounts do you have equity in your house that you can pledge which that is very dangerous because if you already have a business that’s already kind of teetering and they go okay we’ll give you more credit but we’re going to attach to your house the moment you out

we we’ve lost your audio there derek but i think i’m going to go ahead and talk to our viewers about what i believe derek was going to share so yeah if you need more money if you need better terms and you start negotiating on your own with your banker you can make some big mistakes here um so reach out for legal representation early on again you know my offices we offer free initial consultations we’ll talk through your situation and even though i’m a bankruptcy attorney my first objective is to keep you out of bankruptcies come up with a solution that will prevent a bankruptcy from occurring we don’t want to file a bankruptcy if there are other viable options and we can help you with those options

derek another thing i see people do is they will take money that is protected from their creditors protected from the bank for instance money that’s in a 401 k or an ira they’ll take that money out and use that money to fund their business or to make loan payments whereas if they had filed bankruptcy or sought some other type of protection that money in the 401k our ira is completely protected from the individual’s creditors in most instances so you want to you want to act with good counsel before going forward

the next question is can my business declare bankruptcy and still keep operating and i’m going to take that one derek so a lot of people think well my business is failing it’s not doing well let me just bankrupt my business and then i’ll go on with my life and do something different it’s not that simple folks again if you have personal guarantees on loans or you know you’ve pledged your own collateral on loans you still have to deal with those issues and for most small businesses you’re going to have personal guarantees and on your significant obligations you’re usually not going to be able to sign a lease or take a loan from a bank without a personal guarantee so just bankrupting that business is not going to get rid of those personal obligations you have again talk to a good qualified bankruptcy attorney when those problems first start to arise so that you can get some good advice as to how best to protect your assets um you often hear about big large business entities going into a chapter 11 type reorganization um a business can do a chapter 11 in some instances but it’s a very expensive proceeding and usually not one that’s viable for a small business because of those personal guarantees and because the cost of a chapter 11 bankruptcy can be significant a corporation can file a straight chapter 7 bankruptcy but it can’t discharge any debt it’s just really a liquidation proceeding and it doesn’t keep the banker or the landlord or other creditor from coming against your personal assets so it may not make good sense to put the entity into a bankruptcy the simple answer is yes you can keep operating your business if you can meet a whole lot of tests and if you can afford to do so um but consult with an attorney at bond and botes we offer absolutely free initial consultations you’re going to be talking to an attorney an experienced attorney and we’re all from these consultations by phone or video right now if you’re more comfortable with that uh derek i’m not sure if our connection is still good but did i give good advice there is from it from your end you gave perfect advice i could hear you i just couldn’t see you okay well as long as our audio is good here uh man so next question um are banks extending lines of credit right now i think this is a good one for you

okay so that this is the advice that i wish i had been able to give everyone you know two years ago that the time to go ask for credit is when the business is good you know if you have a bang up here and you have record profits everything looks great even if you don’t need it that’s the year you go ask for a line of credit you get credit when in good times if you come to the bank right now and go well i’m struggling uh my revenue’s down 75 the bank is not going to lend you money i mean that unless there is some compelling reason on your personal financial statement that goes okay this is still a good risk they’re not going to touch it so every time i look at somebody’s financials you know if i’m doing like let’s say i’m looking at your line of credit you’ve got you you’re calling and going hey we had an amazing year my advice to you then is going to be ask for an increase to your line of credit go ahead and have it on the books for next year if it by the time usually that you need the money and your business is dipping it’s going to be too late to actually get a line of credit that’s conventional with the bank you’ll be left to those other sources that you spoke about which are not great and then you know you may have to go to sba but you know if you have to go sba you’re looking at two to three months when you need money now so there’s not a good option for that but make sure you if you’re if your business is good go get a line of credit right now don’t wait until it dips derek i think that is the best advice i have ever heard from a banker right there and folks if you if you hear nothing else hear what derek just said you know i’ve heard a million times well you know my bank won’t lend me money if i didn’t need money they’d lend me money but now that i need money they won’t help me well it just makes sense the bank will lend you money if they think you’re going to be able to pay it back boy what great advice go out and set up those lines of credit when your business is doing good so they’re there for a rainy day if you need them um i’ve learned that the hard way over the years and we keep good lines in place now but there have been some rough times and yeah you’re right it’s hard it’s hard to borrow money so oh yeah banks banks hate when you set up a line of credit and don’t use it but i’m telling you that that that is your best protection against downturns in the business is going ahead and having that conversation with your banker the year before you have problems

so next question here and i don’t know if you feel like you can speak to this or not but i imagine you’ve had a lot of experience um with customers that have had commercial lease payments this individual wants to know what’s the best way you know business is down due to covert i’m behind on the lease payments for my business what’s the best way to deal with those what’s your advice there derrick i i have not done any we don’t do leasing here yeah most of the time that’s required at a bigger bank i know wells fargo has a big commercial leasing reasons as a big commercial leasing um but just as blank just a blanket statement for all that

be up front with your banker up front go hey this is i’m having problems what are my options a lot of times they can go okay we can give you a two month deferral we can give you a three-month referral that money is going to be due at the end of the end of the term but a lot of times they can buy you a couple months if you just call and go hey i’m having problems where you’re going to run into horrible issues is if you don’t say anything and they have to call you and go hey buddy you haven’t paid your 90 days we’re coming to pick it up if you’ve already told them ahead of time it’s in their best interest to work with you too because you know the way a lot of bankers get paid is that once you start having bad assets that gets into the money you make too and it’s in your best interest to work it on the front end instead of the back end don’t no surprises

yeah i i tell my clients um consistently be upfront you know with the people you’re working with keep good records as to what you were told with respect to the commercial leases in particular here’s my advice right now there are a lot of people hurting and commercial landlords themselves hurting and the last thing they want is an empty space so they’re certainly not going to be as quick as they have been in past years to evict tenants if they know that the slowdown is covert related if they know that your business is viable or you can demonstrate to them that the business will be viable going forward talk to them be proactive say look we’re down i need some help with rent here can we put some rent payments at the end of the lease can you give us some sort of break for the short period of time um their alternative if they don’t work with you is to evict you and then they’ve got an empty space and they’re not collecting any revenue and they don’t have the hope of collecting revenue down the line um now if you’ve personally guaranteed the debt you know you may still remain liable for that debt and it’s something you’ll have to deal with again get advice from from an experienced bankruptcy attorney we’re offering absolutely free initial consultations but landlords are going to be more willing in my experience to negotiate with you right now than perhaps they have been in the past um as are most lenders because you know we’re all hurting right now i mean the way those work too when you when you’ve got a strip center and you’re trying to lease another space beside it it doesn’t just hurt them on the one that you’ve walked out of nobody wants to be inside an empty space either so it it’s in the best interest to work with you no no strip center wants to have three open bins it doesn’t look good for any business going forward yeah i i your landlord’s often going to be in that same situation you’re in right now be be forthright be honest um be prepared to show them uh your financial records to support the fact that you think business is going to you know improve going forward and we all um hope that uh as people are becoming vaccinated as we hopefully are pushing uh this pandemic um into the rearview mirror um that business owners uh we will do better moving forward um but but yeah uh talk to your landlord be proactive suggest solutions that might work for both of you

derek

are there any other the ppp loan eligibility it’s my understanding that’s all closed up at this point is that correct or is there still eligibility for people that that are hurting uh limited there there is um what i’ve been telling people right now especially as this kind of pulls out um talk to your accountant about the employee retention credit um it’s only for if you did not qualify for a ppp loan but it also allows you to go back and go okay from the period of january first you know 2020 to i think it’s maybe july of this year but you can basically apply for credit 50 of the wages you kept on the books for that time you just have to keep good records have your account provided but it’s not as good as a ppp loan but it’s 50 of your wages over that period as a tax credit would be a huge help a lot of people it works it gives you a a a loss carry forward that you could use for the next three or four years that would help offset your taxes as you recover another excellent piece of advice and i hadn’t even thought about that but yet another good reason well we need to we need we’re plugging these accounts a whole lot right here but yeah you need another reason to have a good account um so the relief that’s out there to small business owners right now may have the ppp loans the other type programs that the banks have offered is drying up but but there are options from a tax preparation tax relief perspective so talk to your accountant about those derek um so so a lot of businesses now will be seeking forgiveness of their first uh first draw on the ppl p loans and some point in the near future their second draw let’s talk about the requirements of that because i think those are important if i had three employees when i took the loan and i’ve used the money to pay employees but now i’m down to only one or two employees is that going to affect my businesses eligibility for forgiveness of the loan brad i’d love to tell you that i could comment on this with absolute accuracy but my understanding is that they have to be paid for a certain amount of time i’m not for some reason i was thinking about nine months it could be six months but that’d be one one i have to get back with you with uh that like i said i always pass that to our sba guys so i’m not fully aware of those requirements sure and you know again reason to reach out to derrick or another banker they may not have the answer but they’re going to have the resources to get you the answer as derek said at south point they have uh former sba guys that are that are working with you right now that can provide answers to these questions there is some uncertainty out there um you know i think the intent of these loans was for you to do your best to keep as many employees as possible and to use a certain percentage of those monies received on payroll costs or other qualifying costs the other expenses derek would include rent and then perhaps expenses necessary to protect your employees perhaps make changes to your workspace so that your employees are safe or have been safe there were some allowances for insurance that you were helping pay in on uh employees behalf

there’s all sorts of payroll tax issues that you can you can write into there but that’s another one you don’t want to do that yourself you want to have an accountant who’s pulled those numbers for you and submit it you that’s nothing you want to just send a quick bucks in on derrick um i’m going to open this up and then i’m going to let you comment on it um i i think there uh for people that are involved with a small business or cop contemplating starting a small business there are some tremendous advantages to doing business with a with a smaller bank now i say that i’ve had a as you know derek i’ve had a long good relationship with um with one of the larger banks that you used to work with um but you know things changed so quickly the ownership of that bank has changed once since since you were there and he’s getting ready to change again

fortunately i’ve continued to be able to deal with good people um but but derek you’ve worked with both larger and smaller banks from your perspective what are the advantages of working with a with a smaller bank uh if you’re if you’re a business owner um well i mean i i i try to deal with people that i want to be around you know i i try to involve myself with people that

are a good character and you know if you get into a good relationship with a banker and then they start to know about your business and they take the time to learn about those things they’re more likely to give you a little bit more leeway when things are going south you know but when you have a big bank and you’re having to send your financials that are not being monitored by your banker they’re going to send it to a back office person they’re going to look at it as just zeros and ones it’s going to have there’s been no color provided to it they’re going to go this passes or it doesn’t um smart are just a lot easier to deal with on things like that um and this was the same way when i was at service first too was that you you can’t hide at a small bank you know if something goes bad you’ve got my number and you’ve got my cell phone number it’s tough for me to to hide from you if some if you’re trying to reach me and something bad is happening it’s hard for me to dodge you especially when we have you know our office staff all of our assistants they’re all available to get to so it’s hard for you to get stuck in a customer service loop of not being able to reach somebody especially when things are not going like you want you won’t be able to pick up the phone and call somebody directly you don’t want to talk to a customer service you don’t want to be on a 1 8 1 800 number you have a some sort of relationship with that person

well i i i will say the analogy i would make derek is what’s happened in the mortgage business over the last 30 40 years in this country you know there was a time when you wanted to buy a house you went to your local bank and you knew your local banker and and they lent you money based upon your character and your your standing in the community and your ability to repay certainly but then if something happened the community or with your business and you got behind on your payments you could go to that local banker you could talk about the situation and come up with a solution that hopefully will allow you to stay in your home most of the large mortgage lenders today they’ll lend you the money and then you’ll never see that person again because the loans are securitized they’re sold off and they’re serviced by some entity out there that really has very little leeway they they have a lot of um stock answers to questions you’re dealing with a different individual every time um in my mind that’s why we’ve had a lot of problems we’ve had in this country with mortgages over the last couple of decades it’s great when you still have an individual at your local bank that you can work with so you know if you’re looking for a banker i i strongly suggest that you consider uh service first and you continue consider derek johnson derek if if people wanted to reach out to you if they’re involved with a business how can they contact you uh well if you want to contact me you want to actually come in and talk give me a call i’m at 205 503 5000 um that’s going to go through my assistant they can find me pretty much anywhere um but i’m always happy to provide a little advice you know what even if you come to a come for a loan and i have to say no but usually my path is to go if you do it you know this is your path to getting there and you know you’ll have something to kind of shoot for to go okay if i do these things i know that he said that he will do and i try my best to never say i can do something that i can’t you know and that’s that’s a really good part of the freedom of a small bank a lot of people you know everybody here has got to know exactly what they can do all the time so if somebody here tells you that they can do something most of the time they’re not going to fall back on that they want their word to stand for something so it’s a good way of doing business i i mean i’m probably a little too invested in a lot of my clients just because they they do become friends over time you don’t want to see anything bad happen to them um but yeah that has got me in trouble in the past too where i’m fighting for things that probably can’t be saved too well i i can say having known derek for a couple of decades now i think and having worked with him both as a banker and in other endeavors and just have him as a friend he’s someone you could trust um and if he tells you no he’s going to explain why that’s the case and and how you can reverse the circumstances so perhaps you might qualify for a loan that you wouldn’t have qualified for otherwise derek operates the way that i hope um you’ll find all of our attorneys work at the bond and botes law offices i believe you’ll find it we we believe in you we want things to work for you we want to help you um you know derek didn’t become a banker to to take homes from people to to exercise or to proceed against personal guarantors he became a banker to help people realize their dreams um and be successful and i know he’s done that with a lot of his customers at the bond and botes law offices we’re here to help you we are a bankruptcy law firm but bankruptcy is is never going to be your first option we’re going to explore all your options you’re going to talk to an experienced attorney if you need help but reach out before things get too bad with so many of these issues being proactive is the best solution

let people that are experienced in this area work on your behalf whether it be your banker or if you need an attorney bond and botes law offices are here to help you we’re located throughout alabama throughout tennessee and in the knoxville area in tennessee right now we’re offering absolutely free initial consultations and we’ll do them from the comfort and safety of your own home or your office just reach out to us you can go to our website or you can call the phone number on your screen and we’ll get you to an attorney and we’ll talk about your options and we’ll help you find a solution and we’ll work with trusted professionals like derrick johnson at south point bank because uh i i know who you can trust out there and i know who you can work with derek um we’re near the end of the hour and i want to be respectful of your time i want to thank you so much for joining us today we really appreciate it i really enjoyed always happy to see your face buddy well thank you so much to all of our viewers please tune in again next week we promise to have another interesting show remind your friends about this in our previous episodes which are on our facebook page and on our firm’s website but until next week um just remember your faith your finances and your family and god bless all of you thank you derek bye buddy happy day bye