By Carole Stewart
(HIT) – According to the mail and the 20 to 35 calls received each week on four business lines for our small Pennsylvania communications conglomerate—the world is full of wonderful lenders who cannot wait to help fund property, start-up, cash flow, expansion, renovation, and of course any need to hire more employees so that businesses can prosper and grow.
And that would be a good thing to the extent that these offerings were true. But just as millions of unsuspecting first time homeowners were lured into homes they could not begin to afford in the previous decade, the truth was that taxpayers did little more than create massively larger taxpayer debt to demonstrate that home ownership is not at all a “right,” but rather a sophisticated network of obligations that begin and end with responsibility to all other taxpayers.
It was a expensive lesson for everyone involved, none less than those who were pitted against the cruel reality that someone somewhere did indeed have to earn that privilege; and that they would experience an ever increasing need to become more competent and earn more for the subsequent upkeep.
This true story is intended to personalize a largely unknown danger that begins just about exactly where the bank mortgage bailout ends—and quite likely is but an unintended consequence of the multitudes of failures that still need to be addressed.
Business was good, interest rates high when the market crashed in the mid-2000’s. Our fourth generation family corporation rode out the storm because we didn’t have any loans and did our borrowing internally from our own retirement and life insurance funds. We were proud of our affiliation with a major bank that fared well, and we went forward with renewed caution in our dealings with government and with banking in general.
Preparing for the Unpreparable
While not falling into a black hole at the sudden discovery that our husband, father, business owner and inspiration—suffered from cancer, lives did indeed change. The family doubled down and made the necessary adjustments so that the boss could be cared for at home as he demanded, and where he continued to close supervision of all operations from his well-adorned bedroom.
With two sons busily manning marketing communications offices in the big house and a full-fledged print and fulfillment shop on the hill above, it became the job of one member to adorn that bedroom at the top of the 15-step grand staircase, and to keep the information and nourishment flowing up and down—even as 25-mile trips were made weekly and then daily to a major cancer center in the city for chemo and radiation.
As our family fought the relentless battle and gave thanks for truly excellent health insurance which included the original Medicare plan and a thorough Medigap policy, there was regular witness of people signing in with piggy bank in hand, and not infrequently being turned away with tears streaming. It is ever so important to remember not to shortchange the most important property you are charged with, your own vulnerable body.
So it was for the next several years, our tireless group fought the good fight. Shouted in triumph when the cancer count went down and cried when the blood counts went down even faster. Time and circumstance eventually took a major toll, and the repeated chemo and radiation attempts rendered the “boss’ totally blind. As I sat at the bedroom desk or the side of his bed each day, it was through my eyes and my hands that payrolls were paid and the quarterly reports prepared and filed on schedule, tasks I had never dreamed of doing.
My own work as editor of Home Improvement Time—since the loss of my father-in-law and founder of the 49-year-old editorial publicity program—was often put on hold as I unexpectedly accompanied my blind husband for various hospital trips. In each instance, I would return to find that my youngest son had sorted through the unfinished tasks on my desk and finished them, just as I had done a decade ago with his grandfather to keep the publication on schedule.
Outside, the oldest son, who had returned home to help care for his father, tended the lawn, and the plumbing and gardening and many of the big and little disasters that fall upon wonderful historic farm properties like ours, working with his sister to keep the place in order. The 100-year old original structure taught numerous valuable remodeling no-no’s, and a preponderance of feature and photos have been printed here on these pages, as we discovered upon removing the one ceiling because of an upstairs plumbing problem, that there were not one bu three ceilings. Each covered up what the previous one had been unable to master.
By the time we lost our precious “Boss” it was with a full understanding that we had big shoes to fill, and after a 53-year marriage to that former Marine, I am here to tell you he would be properly proud of our efforts. But the story does not end here, and it is imperative that it be told through every possible news source, until no other homeowner ever faces what is before us right now!
As soon as we were able to think of such things, the family took on the task of restructuring and repairing all manner of things. The family member who had been charged with leadership had become caught up in the creative aspects of website design and marketing, and chose to abandon the family printing model altogether to structure his own business—together with his wife who had been an employee for nearly 25 years. So it happened that this son traded his shares in our business for a customer base made up primarily by large companies his father had cultivated and served for four and five decades. Not surprisingly our larger corporate structure suffered a major cash-flow crisis and needed to access some of the equity in our fine property.
As we reviewed declining business opportunities without the printing capability, and the awesome reality that together we brought more than a hundred years of industry experience to work each day—the decision was quickly made to lease the first of what would be a series of new digital presses as we started anew and began to bring back both the customers and the employees who had for so many years helped our fourth generation family businesses prosper. We were able to make a good deal on a year-old model, and were approved at once for the lease as the companies had no debt.
Understanding that it would take an extraordinary effort to win our print customers back, and with the realization that we would be in every respect a “start up”, we forged ahead, applying to our own bank of more than 25 years for an equity loan to cover the necessary renovations and cash flow for a proper start. We also met with our local Small Business Association (SBA) advisors and our state Department of Community and Economic Development (DCED), for help with structure and review of our preliminary plan, and to see if we might qualify for lowest interest rates—but did not fit any existing offerings.
Not even the Veteran’s Association (VA) could fit our situation into their flexible mortgage criteria as the property is zoned commercial—to accommodate the printing and communications businesses. Then as lending institution after carefully chosen lending institution turned down our applications over the next increasingly uncomfortable months, we would finally begin to discover the why. Value and beauty, and in our case history of the property is of no concern to the underwriters who do not want to be saddled with real estate; nor apparently was the record of decades of clean credit history.
The commercial loan we were applying for with more than sufficient owner-property-equity would have earned nearly twice for the lending institution that of a residential loan. We were declined the first time, curiously, without ever filing an application. And here is one of the most important lessons we learned after it was too late:
One absolute need is for home and property owners to make application for the best rates to several lending institutions within a single two-week period, as opposed to one at a time, as we unknowingly did over what turned out to be a nine month period and which ultimately caused 11 separate credit inquiries to be factored into our once respectable FICO score. Had we been aware of this practice we might have had but one.
One further word of caution. Beware of unscrupulous operators who may call and represent as employees/officers of a funding institution that can be reviewed online, and who require substantial upfront application fees, but may in fact put the private information you have entrusted to them out for bid as brokers, without ever an apparent consideration by the company represented on their own documents. Consider the unsettling experience of receiving 13 consecutive calls in one day from lenders who said they were replying to my application for a loan.
Commercial or Residential Zoning?
Our family has held clear title for our single plot 5-1/2 acre property for 60 years operating commercial businesses here for much of that time—which required a zoning change from residential to commercial. As we additionally live on the property, we are considered “mixed use” and for tax appraisal purposes listed as a “unique property.”
It is for this complicated reason, we have at long last discovered that we cannot access the equity in our property, and must anticipate difficulty selling the property—if indeed we can save it at all. We likewise cannot qualify for a VA mortgage with two veteran certificates, and cannot even qualify for an age appropriate reverse mortgage, because the Federal Housing Authority (FHA) also does not accept the mixed use status.
For all practical purpose we represent a potentially enormous group of citizens who may be caught in a similar entrepreneurial nightmare. The expectation that generations of hard work creating jobs and paying taxes had secured our home and property for future expansion is false.
Be sure to check for zoning issues before buying or applying for a mortgage of any kind, seek information from local housing authority representatives and other state and local agencies before you begin the process (or buy the new equipment).
Finally, the lending institutions and the agencies that govern them have established criteria for judging who get funded and who does not. Develop your own criteria for judging lending institutions, and for heaven sakes don’t base it on who has the most fashionable greeters in the bank lobby. Lending institutions that are unfriendly to small businesses should probably not be bothered with the lucrative accounts for that populace.
Home and business owners in most areas have convenient state and federal congressional representation. Talk to them. Seek answers and do not stop until you get them. Change is always possible!