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The opinions of entrepreneurs' contributors are their own.
In the months after September 11th, I was beside myself.
But my fears had less to do with the Word Trade Center tragedy than with the fact that my business was failing after 10 years of rampant prescription opioid abuse. I was desperately looking for an out. Meanwhile, there were advertisements on television and radio for 9/11 FEMA loans administered by the United States Small Business Administration.
So I lied on a particularly bad day.
I said I had an office near Ground Zero. I received the SBA loan I requested and immediately paid off the personal credit cards that I had used up while waiting for the SBA money. Even so, the credit did little to stop my spiral of drug addiction, mental health problems, marital problems, and magical thinking.
In 2002, I gave up my legal license and made my way to recovery. But everything caught up with me about 20 months later when I was arrested for providing false information on my loan application. I spent almost 14 months in federal prison for cable fraud and money laundering.
My goal in writing this article is to provide some insight into what business owners should consider before taking out disaster loans. Certainly, the majority of the people who apply for these loans are honest and high standing business owners who have immense need for help and who use the funds properly. I am very happy that there is help for them. However, history has shown us time and time again that people in great need are more likely to make impulsive, ill-advised decisions. I hope that sharing my experiences will help others avoid the consequences I have faced. There are seven food stalls here.
Related: How my life as an entrepreneur shaped my time in prison
1. Desperate people do desperate things.
After September 11th, there were thousands of scam pursuits, Hurricane Katrina, Superstorm Sandy, and so on. Why? Whether because of overwhelming business problems, poor personal judgment, or just plain bad luck, people were wounded, desperate, and ready to do anything to stop the bleeding. But if the wound is too deep, a plaster will not be enough.
Practice Point: In any situation, desperate behavior is unlikely to save your business.
2. Beware of the belief that rules are exposed in an emergency.
The government touts that huge sums of money are available to save our businesses. I recently attended a webinar hosted by a very reputable business advisory group that recommended that attendees submit their SBA disaster loan applications immediately, regardless of the facts or real needs of their business – – They said we could change our applications anytime before we take the money. The state unemployment websites actually provide written instructions on how to mislead and bypass the system in order to obtain a permit. Don't take the bait! If you are in default in two years' time, this “well-intentioned advice” doesn't matter to the prosecutor.
Practice point: Always be honest.
3. Beware of magical thinking.
This is a tough question because entrepreneurs are naturally optimistic. We believe that things will always be better tomorrow than they are today. It drives us, makes us successful, informs us about our taking risks. But in times of trauma, that voice can be an entrepreneur's worst enemy. Does that sound familiar to you? We learned the hard way that there is no shortcut, and yet we really want there to be now.
Practice Point: Instead of reaching for a rescue package or other quick fix right away, develop a solid business plan. Perhaps a catastrophe loan fits into this plan; Maybe it won't.
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4. This paradigm shift affects all small and medium-sized enterprises.
We are in the middle of a massive reorganization that has already had a major impact on small and medium-sized businesses. Entrepreneurs are asked to carefully examine whether our business models are still viable or whether we need to turn to new methods. Example: The Swiss watch industry completely missed the switch to digital watches. Have we waited too long for a robust online presence? Are our products or services still needed? Have we clung to a thread for years, unwilling or unable to look at the hard facts?
Practice Point: Get Real Now. Don't borrow money to save a business that can't be saved.
5. Be careful when taking out government loans.
As with any loan, the devil is in the details. The terms and conditions in the loan filing set out what you can or cannot do with the money once you receive it. You can only use the money for the purposes you stated in your application – – that is, paying the company's running costs to keep it alive until it brings back enough revenue. You (and your spouse) will likely have a sign on the loan in person and will likely need to pledge all available collateral, including a second (or third) mortgage on your home. If you have used your personal credit cards to the max while anticipating your disaster relief funding, you will not be able to use the money to pay out your cards.
Practice Point: Read carefully the terms and conditions of the loan. Whatever the loan terms dictate, do and whatever they say don't do, don't do. No exceptions.
6. We cannot save our business and our lifestyle at the same time.
Here's the big trap. We have mortgages, car payments, school fees, and other personal expenses to be paid for, and soon. But put simply, SBA loans are designed to save your business, not your lifestyle. Discuss all of your options with counselors and friends you trust – – those who will tell you the truth! It's like going to the doctor. Your diagnosis is only as accurate as the medical history you provide. These are tough times with a triage system that is quick rather than thorough.
Practice point: There is no free lunch. B.Making money comes with responsibility and accountability.
7. Familiarize yourself with acceptance.
Hope we are all great entrepreneurs who can find out how our businesses can survive and thrive. But let's be honest. Some of our companies won't make it even if government funding is provided. What should we do? We can reduce ourselves, accept changes and do things differently when we start a new chapter. Never forget that there will always be opportunities to start over and live a fuller and richer life.
Practice point: Sometimes less is much, much more!
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