It looks like Congress has put a new budget deal in place that will keep the government up and running for the next two years.  The response from experts has either been hurray or boo, depending on their leanings.  I am not going to comment on the deal in this blog.  We can sit down, have a delicious beer and get down with our nerdy selves regarding Keynesian versus Austrian economic theory and their respective places in Washington fiscal policy.  However, I will let my opinion be known on beer in this blog and my comment is … “Yes, please…may I have another.”

Some of the terms in this little blog are often misunderstood.  For example, what a debt ceiling means to most Americans is different from what it means in Washington.  For my family, a debt ceiling means the most money I can borrow while still making all of my payments and living the life I want to live.  Coming from sturdy, Lutheran, Northern European farming stock, our comfortable debt ceiling equates to virtually zero. 

The government definition of a debt ceiling is significantly different.  A debt ceiling, in US Government terms, means a limit set by Congress on the amount of money that can be issued by the US Treasury, thus limiting how much money the federal government can borrow.  The difference is we as families, cannot print our own money (legally, the currency of the United States of Mike has very little value) whereas the government can continue raising the debt ceiling by votes of Congress  and then borrowing the required money until the next debt ceiling is reached.

The difference between deficit and debt can also be confusing.  Deficit spending is what happens when revenues (taxes) are not sufficient to cover current obligations.  Debt is borrowed money.  It is the money used to “fill the gap” between revenue and expenses.  Deficit spending has actually dropped over the past year.  Despite the drop, revenues still do not cover current obligations and our debt increases, though somewhat more slowly (what’s a few half trillion dollars among friends?).

So, what are the ramifications of this budget deal (or if they would not have passed a budget deal)?  A number of possible scenarios have been theorized, with the worst being ...duh-duh-duh… a total economic collapse.  You know, eating rock soup, runs on Spam at the store and manufacturing millions of tin foil hats.  By the way, here is my tin foil hat. 

I am once again guilty of digressing.

This scenario, containing funny hats and canned meat, is probably unlikely.  More likely, nothing happens and life goes on as normal.  Markets might get jumpy and there might be a few freak outs.  Currently, if you look at debt as a portion of GDP, the 2015 numbers are less than or equal to government debt from the mid-1940’s to the mid-1950’s.
 
So, what does any of this have to do with the 504 loan and commercial borrowers?   At some point, the deficit and debt problems will have to be addressed.  If borrowing continues to increase (deficit spending leading to debt), interest rates will necessarily have to increase.   Being able to lock in a 20 year fixed rate loan to purchase long-term assets now, when interest rates are low, may be the wisest investment a borrower can make.  Locking in a 4.8%, 20 year fixed loan when interest rates could double over that same 20 year period makes good fiscal sense.

I think it is a great time to drink some pre-apocalyptic beer, grill some Spam, compare our tin foil hat creations and talk about buying a building for your business.  It might be the perfect time.

Back in March, I introduced Moby, our brand new Goldendoodle puppie.  As a reminder, here is a picture of him when he first came home with us.  I am not really known to be a cuddly, emotional kind of guy.  But, seriously, AAAWWWEEE...Sweetie, cutie-pie...Who’s a good boy…Who’s a good boy…oh yeah... back to the blog.

Pretty cute, quiet and, after rereading the blog I wrote about him, my memory was jarred into remembering he was a lot of work.  Still….time heals all wounds and many great improvements have taken place.  First of all, he no longer conducts any of his…business, in the house.  That is a super positive result.  He also does not chew the heck out of all the wood in the house.  We have to replace baseboards, window blinds and a table leg, but that behavior is gone.  Woo-hoo, positive check number two.   All good things.  All good things.

So, here is Moby now.  Obviously, he has changed significantly.  He is much larger (I am brilliant at stating the obvious, thank you very much). He is also loving and sweet.  Mr. Moby has really settled into being an integral part of the family.  That is not to say we have no issues.  Where before we just had normal puppy troubles, we now have a full throttled, critically thinking bundle of strategic energy.  Our little cutie has developed strategies to get what he wants.  He kindly summarized them in the following graphic (I actually made the graphic, he just told me what to write down).

I am not sure his premise is correct that getting more snacks makes him a better helper, but what the heck, let’s just run with it.  He has developed strategies to ensure that he gets the necessary sustenance to be that good helper.  He sneaks food when we are not looking.  A missing plate of raw hamburger proves that.  He acts like he is interested in one food item, say a tangy, pucker-inducing yellow citrus fruit, and then drops it and runs to steal a more appetizing morsel when we reach to pick up the fruit (see  picture…that is not a ball in his mouth, it is a LEMON).
The following pictures illustrate the point even more.  He steals socks and pillows, takes them into the backyard or into other rooms of the house, and holds them for ransom until we provide a treat.  Should we treat him for stealing our stuff?  Of course not, but he is incredibly fast and impossible to catch when he gets outside.  We are trying to change the behavior, but sometimes I am running late and just want my dang socks.

So, as business owners, what can we learn from this “dumb” dog?  Creating plans and strategies to meet objectives is smart business.  Strategic planning is an evolving, dynamic process that adapts to surroundings and the business environment to accomplish a beneficial goal.  Every business, no matter its size, should create strategic plans that contain measurable objectives with timetables and responsibilities.  These objectives should be changed and evolved as market conditions change. 

The old Soviet planning method created five-year plans that remained static and monolithic.  And, of course, the Soviet Union collapsed.  Trying different tactics to reach the goal is important and can keep an organization agile.  Be willing to move and adjust.  Learning what does not work is a critical part of planning and strategic thinking.  Think in terms of plan, evaluate and evolve and then repeat, repeat, repeat.  It has worked for my dog and I think it will work for you.  Moby is available for a consult at your earliest convenience.  Just make sure you leave your socks on.

It has been awhile since I wrote a blog.  The entire summer seemed to get away from me.  I blinked and vacations were over, the pool closed and school started up again.  So where did the time go?  I cannot use the alien abduction excuse again.  Surprisingly, it only works once or twice during a career.

So what happened?  Well... we completed the largest deal in the history of the organization.  The largest by a long ways....Seriously, nothing else has even come close.  Actually, for a small organization, it was kind of spooky big.  Why do I consider the loan scary?  Well, obviously a large deal has way more money changing hands, and in the case of a "Fall of Rome" style collapse, the risk to Enterprise is higher than a regular sized loan.  And carrying that logic to a more personal level, the risk to my job and house and reputation and... well, you get the picture.  These thoughts go through every conscientious lender's mind.  It is what makes us human.  However, dwelling on these "Eeyore meets Chicken Little" thoughts is the enemy of anyone in commercial lending.   

First of all, making this scary risk tolerable is the very purpose of the SBA 504 Loan Program.  Enterprise Development Corporation and its banking partner worked together to understand the positives and the negatives of the deal and shared the risk.  Secondly, doing the proper due diligence by thoroughly examining the 5 C's of Credit (Collateral, Capital, Character, Cash Flow and Conditions) dials the scariness factor way down.  With this attention to detail, a lender can sleep better at night.

The loan will sit in our portfolio for up to 20 years, so obviously it needs to perform.  We feel comfortable with this loan because we sent the summer doing due diligence.  I sacrificed my TAN for the loan (honestly, I have kind of a transparent Scandinavian Lutefisk skin, so it wasn't that big of a sacrifice.

Here are some key points we looked at during our process:

1.  The Borrowers:  We reviewed the borrowers' credit and collateral.  Their credit was absolutely top notch and they had enough personal assets to guarantee the loan.  They were willing to put enough of their own capital into the start up to show how confident they are in its ultimate success.  Finally, they are known as reputable, honest people who give back to their community (character).

2.  The Existing Businesses:  The existing businesses already operating under the corporation are run professionally and successfully.  They have systems in place and keep meticulous records that are necessary to help a lender make a decision.  The businesses also have a good enough cash flow position to support the new venture if it starts more slowly than expected.

3.  The Proposed Business:  The proposed business appears like it will meet the needs of the market and the conditions seem right for success.

This process seems easy right?  In theory yes, but we look at every affiliated business within a borrower’s corporate reach, and we review any potential issues each piece of the corporate whole might have.  For a normal borrower, this process is easy.  This particularly borrower had seemingly multitudes of affiliated business (less than 100, but not a lot less….).  We make good loans and have a solid portfolio because of this due diligence process.

Summer is over and the days are shortening.  I have no tan and I have gotten a few months older.  Sorry there was not a blog for the past few months, but, obviously, a lack of visibility does not mean a lack of activity.  It is good to be back.     

One of my 11-year-old son’s best friends was at the house the other night for dinner.  We sometimes leave the old game of Boggle out in the middle of the table to see how many words we can make.  It is fun and it really can stimulate conversations and open people up.

My son thought he had a word, but we pointed out that what he thought was a lower case “d” was actually a capital “P.”  When he started explaining his mistake, his friend aggressively yelled “EXCUSES ARE THE NAILS THAT BUILD THE HOUSE OF FAILURE!”  Everyone around the dinner table got really quiet.  The friend looked a little embarrassed and sheepishly said “Too intense?”  The rest of us looked at each other and fell out of our chairs hysterically belly laughing.  It was a great moment that I will probably remember for the rest of my life.  By the way, it is a saying his older brother heard on his high school track team.

I started thinking that, though hearing this come out of a very sweet, naïve 11 year old boy’s mouth was a little surreal, the saying itself is pretty wise.  I know I am guilty of “adding nails” to many tasks that I should do correctly the first time, but for some reason did not.  I have made excuses in my own businesses and here at Enterprise.  

I even used the saying with the girls’ 3v3 soccer team I coach, though I said in a slightly nicer and less passionate way.  After all, the intensity in a state championship 3v3 soccer game and Boggle are incomparable.  Nothing is more intense than “around the dinner table” Boggle.  Priorities, priorities…

Excuses do give us a justification for not doing what needs to be done.  These are some that I heard this week from clients.

Question:  “Why are your financial statements inaccurate?”

Answer:     “I didn’t have time to enter the data into Quickbooks.”        

Question:  “Have you made your sales calls to past customers this week?”

Answer:     “I got caught up with another project so I decided not to make the calls.

I am certainly farrrrrr from perfect and make similar excuses.  Just ask my wife about the weed eating and edging that I have not done for the past four weeks.  Let’s see, my “nails” have been, my ankle hurts, it’s too wet, it’s too dry, it’s too hot, no gas (though the edger is electric) and I have to prepare for the upcoming soccer tournament.  These all seemed reasonable at the time, but, honestly, they are pretty lame reasons to avoid doing something I hate that is actually pretty important.

It is hard to point the finger at someone else when you are equally as guilty.  So hopefully, with the help of a very intense 11-year-old Boggle maniac, we can all learn a little lesson.  “Honey, I am coming home to weed eat and edge!…. tomorrow.”