By Parag Nevatia
No: We all started hearing this word as we were growing up from the cusp of our pre-teens into our early adult life. It seemed like it was the end of the world when we heard this word from our parents. Fast forward, when we became parents, we went through that all over again with our own children. I have a 12-year-old going on 20. I feel, and I’m sure most of the parent readers will agree, that many times it’s our own guilt which makes us give in to accepting the faults of our children.
By the way, we don’t admit it to ourselves so easily. So what is the significance of this special word No? Why can’t we say Yes instead? Does Yes reveal a weakness or surrendering? Or maybe it’s just not ok to surrender as a parent. So we tend to succumb, maybe at a later time, while some others just claim to demonstrate valor by being principally correct or proper in their own way.
Those who stand up against it, and don’t throw their towels in, are not really afraid of the consequences. So which is better, subtle succumb or a flat out no. We are going to talk about such things in this week’s column, but turn the direction towards Financing.
So imagine the time in early 2000s, when small business lending was on the rise. Banks were willing to lend to—pretty much any profitable business in operation for at least 6 months. A few years later, inflation hits and then burst the financial bubble with the fall of big guns like Lehman Brothers and Bear Stearns, which eventually sent ripples across the globe and led the economy into recession.
Then began those hundreds of thousands of arguments and debates over non-performing loans, in other words, people not being able to pay back their loans to banks. Everybody witnessed this chaos as it all came down. Were there any lessons to be learned? Any takeaways? Sales have always been the road to profitability and success, but only increasing sales and ballooning receivables which were not going to be paid back, was clearly flirting with danger.
Ever since the dust settled (after fitness tests and the Troubled Asset Relief Program or TARP money being returned to the government), the fittest banks slowly but surely went back out to tell businesses that they are still lending, but deep inside things had certainly changed and drastically tightened up within the system. Changes took place in management, culture, underwriting standards, global cash flows, risk calculation/tolerance, stress tests, etc. This is what gave birth to today’s credit environment.
Somewhere in the midst of all this newness, that same old word that we used to hear from our parents and thought we all gotten away from, is surfacing back! Just that this time we are not hearing it from our parents or saying it to our children. It’s the banks that are saying it. NO. Is Main Street ready to accept this confusing phenomenon? Sure is frustrating but what is the choice?
Though some readers might think otherwise, but they know there isn’t. Change which makes people uncomfortable is usually never acceptable, at least in the beginning. But the truth is that change is adaptable once understood. Just like “No” is back, let learning come back, as we once did from being a parent. This is the new way of life and the sooner Main Street accepts and adapts, the easier, quicker, and tolerable financing will be.
After a successful career in Commercial Banking and Lending in the New Jersey-New York region, Parag Nevatia founded EZ Funding Solutions LLC with a vision and desire to improve the quality of business credit in the market.
Being certified by the National Association of Government Guaranteed Lenders (NAGGL) that governs the SBA Program nationally, he has the advantage of performing credit and risk analysis, developing creative solutions to overcome obstacles and mitigate those risks, structure debt correctly, and then underwrite a project or loan – all upfront, before presenting it to the right lender who has the appetite to finance the project.
Additionally, Parag serves on the Middlesex County Advisory Board of the Small Business Development Corporation at Rutgers University where he conducts monthly seminars and webinars on “Lender Scrutiny.” He also serves on the Middlesex County Regional Chamber of Commerce Ambassador Committee.
Editor’s Note: Read a new article by Parag Nevatia every Thursday.