[abfunders]

Curious what everyone thinks here:
I'm getting a client approved for an SBA. The UOF is business expansion, but his business has several aspects: Drop shipping (which is his main company), private equity deals in student housing, book publications, online events to promote the books. The main reason for the loan is that he wants to purchase a hotel abroad from a retiring owner and revamp it.

He wants to max out at the $350,000. He can revamp his website, SEO, start manufacturing his own parts (as opposed to drop shipping)... but most of the money will be going to this foreign purchase. Anyone have good experience "dressing" the request from a bank to make it sound the most legit? Will the SBA lenders start interviewing him about the use of funds, or check up on him? I'm sure that the SBA money can't officially be used for the non-domestic purchase, but if he shuffles money, I'm sure it's legit. I just want to hear anyone's experience.

[Yankeeman07]

You should already know the answer SBA Eligibility

Be engaged in, or propose to do business in, the United States or its possessions

[abfunders]

So like I said, most of the business is in the USA. I'm trying to dress this SBA request in the way that makes the most sense to a bank that instead of re-investing profits into the company and thereby taking fewer profits out of the company for personal ventures, he'll be have working capital left in the company and he will be able to pay himself better and engage in other investments.

Just brainstorming here. That statement is true, but I wanted to hear other constructive advise if anyone had something to share.

[Olderguy]

A business needs to show the funding is for working capital, asset acquisition and/or debt reduction that will expand the sales and profitability of the business. There is a SBA cash flow projection form for 2 year projections. That is what you need to show. It is what it is.

[Yankeeman07]

The business owner is flirting with Bank Fraud

[JonMaga]

The business owner is flirting with Bank Fraud

perhaps the broker as well

[Hedley Lamarr]

Borderline bank fraud. The owner AND the broker who helped him obtain funds could be charged. Due to so much fraud with PPP, the SBA is paying close attention to new applications and the people who are helping them.

[abfunders]

I will take into account whatever ideas are being presented, but just food for thought:
(1) How many CEOs take a very minimal K1 and pour their profits back into their company rather than taking profits out as K1?
(2) If they didn't have senior debt, how much K1/W2 would they be able to afford to buy themselves a home?
(3) How many CEOs (banks included) take million dollar bonuses and their companies operate at a LOSS and there aren't true repercussions other than a public hearing at Congress?

[Olderguy]

I will take into account whatever ideas are being presented, but just food for thought:
(1) How many CEOs take a very minimal K1 and pour their profits back into their company rather than taking profits out as K1?
(2) If they didn't have senior debt, how much K1/W2 would they be able to afford to buy themselves a home?
(3) How many CEOs (banks included) take million dollar bonuses and their companies operate at a LOSS and there aren't true repercussions other than a public hearing at Congress?

One of Winston Churchill's famous quotes is that democracy is the worst form of government except for all others.

[mistamca]

If this loan gets approved & funded & it is based on the plans listed above, then it will be fraud. Will they get caught? Maybe; Maybe not. There is a ton of documentation to get funded. Also loans under $350k carry higher risk for the bank so they typically have stricter underwriting guidelines.

Personally, I wouldn't waste my time on a file like this.

[DonMcGrath]

Curious what everyone thinks here:
I'm getting a client approved for an SBA. The UOF is business expansion, but his business has several aspects: Drop shipping (which is his main company), private equity deals in student housing, book publications, online events to promote the books. The main reason for the loan is that he wants to purchase a hotel abroad from a retiring owner and revamp it.

He wants to max out at the $350,000. He can revamp his website, SEO, start manufacturing his own parts (as opposed to drop shipping)... but most of the money will be going to this foreign purchase. Anyone have good experience "dressing" the request from a bank to make it sound the most legit? Will the SBA lenders start interviewing him about the use of funds, or check up on him? I'm sure that the SBA money can't officially be used for the non-domestic purchase, but if he shuffles money, I'm sure it's legit. I just want to hear anyone's experience.

Maybe acquire a large US asset or property (or stake in that asset or property), and convert that equity into cash, maybe with leverage, and then use that to get the overseas property.


Don’t risk your freedom for one deal.