Small Business Loans

I have seen too many women who have been screwed in multiple ways from investors.  Investors who have given someone egregious terms and the founder takes them because that is their only choice to move forward.  Investors who have harassed women to make them feel that their role is only to make them returns and that means absurd expectations of returns, I have seen texts from male investors hitting on female founders.  I have seen women take an investment with such dilution that they end up not owning enough of the company and then the next round finds that a red flag.  Oh, the stories I can tell.

The most heartbreaking is women who are tenacious and scrappy and figured that all the work that they did prior to meeting with investors was the best way to build the foundation of the company.  They took out a small business loan from the SBA, aka our Government.  The dirty secret that our Government doesn’t talk about is that they are a business too.  They own an insurance company called FEMA.  They own a student loan program that has high-interest payments that can and will essentially make it difficult for anyone to unload that debt for decades.  They also have housing loans where they approve loans for lenders to first time home buyers that have egregious mortgages that can put the homeowner in a precarious financial position.

The problem with the SBA is that instead of being an agency that supports and gives out loans to people with the hope that they have been vetted to pay back the loan, and of course not everyone will have success, they make them put up their homes and other personal assets for collateral.  What happens when the business doesn’t work out is that they either take the home or force the lender to go into bankruptcy which takes a toll on their credit for eternity.

I have never understood why our Government has programs that look as if they are helping their citizens but in essence, they are taking monthly checks from them and if it goes sideways, they screw their own people and cause financial damage that has an economic long-tail that makes no sense.

So, if you are someone who is trying to start their own business and needs some start-up cash, particularly those in the CPG space, which is for some reason where I see this most of the time, do not take a loan from the SBA.  Figure out another way to bootstrap your business because many businesses fail but the SBA doesn’t care about failure, they just care about getting their cash back and that could mean more life destruction than you realize.

Comments (Archived):

  1. Pranay Srinivasan

    There is a way around this. The SBA has a program that funds Hedge funds who invest in certain sectors. A lot of those Hedge funds are giving funds to debt funds that write checks at around 10-12% without personal guarantees that SBA requires. Happy to share some info around this. Theres a list of funds that have the SBA as an “LP”

    1. Gotham Gal

      I know and I find it absolutely atrocious.

      1. Pranay Srinivasan

        Yes its a complete business as if their tax dollars they are supposed to deploy to help spur employment are actually being used as a University endowment.

  2. Lisa Abeyta

    Predatory lending is a lot deeper than payday loans; most loans geared towards businesses are either based on credit ratings that entrepreneurs don’t have or based on personal collateral. I am part of an initiative in our city to create new jobs through economic mobility, and one initiative we’ve implemented is Community Capital – peer-based lending that is based on reputation and relationships, not credit or collateral. One organic food cooperative has pooled their money to make loans to local farmers. Ever single loan has been repaid except one – where the person died and the cooperative opted to not charge the loan against the person’s estate. I’m hoping this model and others like it gain traction – especially for groups and areas where access to capital is so prohibitive.

    1. Gotham Gal

      That’s amazing. You are a serious community leader!

      1. Lisa Abeyta

        The credit belongs to Robin Brule’. I just have the privilege of serving with her. Typed the name wrong – it’s Co-op Capital. Here’s link about it.

        1. mplsvbhvr

          Incredibly cool idea – thanks for sharing the link

        2. TanyaMonteiro

          Incredible idea/business/programme wow, hat tip to you ALL

    2. Ella Dyer

      Sounds like Gareem bank; well done!

    3. TanyaMonteiro

      #predatorylending what a hashtag

    4. Susan Rubinsky

      There are some fantastic community lending orgs out there. The biggest obstacle is that they don’t have enough money to lend. Keep up the awesome work you are doing!FYI, here in CT we have Capital for Change – http://www.capitalforchange

  3. awaldstein

    Loans for CPG based artisanal startups are truly a horrid cycle.There is no good alternative that I am aware of.

    1. Gotham Gal

      There isn’t and there should be

      1. awaldstein

        In the process of conceptualizing a new biz in the CBD/liposomal supplement space and keep running into the same brick wall of how to distribute the products and fund the process.Every time I smack into it I recalibrate to think differently from the very beginning as if I don’t this hurdle will haunt the project from the outset.

      2. Pranay Srinivasan

        What about Circleup? Didnt they launch something for CPG cos?

        1. Gotham Gal

          Yes they did

  4. Ben Giordano

    Thank you once again, Joanne.

    1. Gotham Gal


  5. Ella Dyer

    As an apathetic American (longing to become a full-time ex-pat) this reinforces my thought that the U$A is a case study in how capitalism can turn into cannibalism. When a well-resourced country — albeit one founded on genocide and built on slavery but, that’s a different rant — can’t educate their young nor care for their sick, it’s non-sustainable.