All Forum Posts by: Michael Glaser

This is probably the route I'm going. I'm also going to be talking to an attorney about the benefits of reducing the loan under $25K to keep the fed's hands out of my business.  

I've started another thread to address more of the collateral & terms of the loan. This should worry everyone as it makes your portfolio beholden the SBA to sell, finance, etc. This is anyone OVER $25K. 

https://www.biggerpockets.com/forums/49/topics/835756-sba-eidl-loan-terms-is-it-worth-it-for-25k?page=1#p4913402

I signed up with a "I'll get as much as I can to cover me if everyone moved out at once & see what the terms are". Since signing up only one of my tenants has moved out from CV, thank GOD. I've had to totally gut the house because she was an inherited tenant from a package deal & a hoarder. My thought now is taking the loan to pay for the renovation costs as the interest rate is better than any bank or CU. The only catch is the terms. I can live with general collateral as is with most loans. It's the selling, refinancing, or seeking other loans that worries me. 

 It always has and always will scare me when the federal government shows up and say's "Don't worry, we're here to help."

Thought the EIDL contract terms for those approved needed its own thread.

I was approved and I'm at the signature stage of a loan above $25K. I understand the collateral, but the Requirements for Relative Collateral are a bit much. Not to mention all the other verbiage about requesting an audit of your business at your expense whenever they feel like it. If it were a bank I wouldn't have a problem, but the federal government is another issue. 

I'm interested in what others think of the terms especially the ones below: 

For loan amounts of greater than $25,000, Borrower hereby grants to SBA, the secured party hereunder, a

continuing security interest in and to any and all “Collateral” as described herein to secure payment and

performance of all debts, liabilities and obligations of Borrower to SBA hereunder without limitation, including

but not limited to all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral

includes the following property that Borrower now owns or shall acquire or create immediately upon the

acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a)

inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible

chattel paper and electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including

health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j)

general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms

may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants

includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all

products, proceeds and collections thereof and all records and data relating thereto.

· For loan amounts of $25,000 or less, SBA is not taking a security interest in any collateral.

Page 2 of 11

SBA Form 1391 (5-00) Ref 50 30

Doc # L-01-0476006-01

SBA Loan #8496557408 Application #3600074047

DocuSign Envelope ID: CA47909F-9BAE-44B7-ACA5-7A831F089087

In Process

REQUIREMENTS RELATIVE TO COLLATERAL

· Borrower will not sell or transfer any collateral (except normal inventory turnover in the ordinary course of

business) described in the "Collateral" paragraph hereof without the prior written consent of SBA.

· Borrower will neither seek nor accept future advances under any superior liens on the collateral securing this

Loan without the prior written consent of SBA.

USE OF LOAN PROCEEDS

· Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by

disaster occurring in the month of January 31, 2020 and continuing thereafter and to pay Uniform Commercial

Code (UCC) lien filing fees and a third-party UCC handling charge of $100 which will be deducted from the

Loan amount stated above.

REQUIREMENTS FOR USE OF LOAN PROCEEDS AND RECEIPTS

· Borrower will obtain and itemize receipts (paid receipts, paid invoices or cancelled checks) and contracts for all

Loan funds spent and retain these receipts for 3 years from the date of the final disbursement. Prior to each

subsequent disbursement (if any) and whenever requested by SBA, Borrower will submit to SBA such

itemization together with copies of the receipts.

· Borrower will not use, directly or indirectly, any portion of the proceeds of this Loan to relocate without the

prior written permission of SBA. The law prohibits the use of any portion of the proceeds of this Loan for

voluntary relocation from the business area in which the disaster occurred. To request SBA's prior written

permission to relocate, Borrower will present to SBA the reasons therefore and a description or address of the

relocation site. Determinations of (1) whether a relocation is voluntary or otherwise, and (2) whether any site

other than the disaster-affected location is within the business area in which the disaster occurred, will be made

solely by SBA.

· Borrower will, to the extent feasible, purchase only American-made equipment and products with the proceeds

of this Loan.

· Borrower will make any request for a loan increase for additional disaster-related damages as soon as possible

after the need for a loan increase is discovered. The SBA will not consider a request for a loan increase received

more than two (2) years from the date of loan approval unless, in the sole discretion of the SBA, there are

extraordinary and unforeseeable circumstances beyond the control of the borrower.

 This property appreciated $145K in 4yrs or $36K a year. Why on earth would you sell it? Pull your money our every 3-5yrs and find something that cash flows. 

They're not making more land near the ocean in Oceanside. I would hold that for generations and pull your money out. 

CNBC was saying that in 2008 the overall housing markets took anywhere from 18-24 months to hit bottom. I'm hoping LA's housing market comes down considerably. 

I still think we're at the upper crest of this economy tanking as we've never seen...EVER. 'Hoping for the best' me hopes we get a vaccine in 10-12 months and our economy presses the play button again. 

@Aaron K. found out she recently refinanced which is to be expected. I guess my play would be selling her on closing early and minimizing her holding costs if the house sits there another 3-6 months. I figure for her mortgage rate, taxes and upkeep she's probably approaching $2K/month. 5 more months and she's at $10K. The broker and I agreed she'd be my agent and only take 3% instead of 6%. Cocktail napkin math says I should be able to get her down $20K before inspections. 

@Michael Glaser

Any other ideas? Talking with the broker tomorrow to troubleshoot.

I think she wants to get rid of the property in the short term as I want to own the property as my home in the short term.