Tad, thank you for giving me one of the 3 reasonable answers to my original
post. I agree with all you've said and we met last week with my partners
father, who is in fact a relative of mine, and have agreed to actually give
him a 10% off the top profit yearly until the loan is paid off. (the other
posters may have actually realized this if they would have given me time to
explain the situation and if they didn't think the title of my post was "How
do I screw an investor". He's a good guy with good business sense and I
value having him on board with us. My WHOLE point of the posting was that
the loan officer we're dealing with said that since this gentleman's name is
not on the loan, only myself and my other partner with the other collateral,
that he could not divulge information about the loan to him, and would leave
that up to us if we wanted to, which we didn't really want to do because
he's not a partner in our corporation. That being said ALL I wanted to know
was if the loan officers actions by telling him this info, which I
explicitly told him not to tell him, were somewhat unethical? That's really
all I'm asking. I'm a medical provider, and if I tell someone about another
patient's illness or situation, I can be fired, sued, fined and or
imprisoned for breach of confidentiality. I am far from any kind of banker,
but if this loan officer tells me he can't tell this guy about the loan
without my permission or that I can only tell him, that led me to believe he
may have broken some type of banking law or at least banking ethics. That's
really all I wanted to know. Thank YOU for your impartial insight.
Scott


"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:gutZg.15964$e66.13249[at]newssvr13.news.prodigy.com...
SJ wrote:
- quote -

Scott,
I can't speak to the legalities, I'm not clear on exactly how the
father's collateral backs the SBA loan (it seems he must be a party to
the loan, signing something...and perhaps, to use some legalese, taking
on joint & several liability for the nonrecourse debt?). But here are my
thoughts...speaking from experience with a similar biz-startup situation...

1. Forget about the fact that the loan officer spilled the beans --
maybe it shouldn't have happened exactly that way but he should have
spilled the beans, IMO. If the father's collateral is what made the loan
happen, the father deserves to know that -- it means the other partners
lack adequate assets to make good on this loan, meaning there's a
bullseye on the house if things head south.

2. Not only that, he deserves to have an inside view of your business
for as long as that lien exists, so he knows when and whether to take
action to secure his property. The reality is that you will have, say,
$50,000 in borrowed funds, or whatever the amount is, in your business
checking account. That balance might rise steadily or it might all be
gone in six months, spent on marketing expenses (which unlike say
computer servers have zero "salvage value" in an asset sale). What
happens then when you fold the business? Apparently you don't have the
assets to back that loan, neither does your other partner. If the
business goes bankrupt, you go your separate ways, and the partner's
father is out a house...because the father has the only asset worth
going after. Point being..if I were him I'd be demanding monthly
financial statements and would take whatever action was necessary to
nail down the cash if there was a sign of trouble. Yes, even if my
daughter was one of the partners. It's a business transaction, business
rules apply.

3. Please take my word on this part. Before you spend a dime of the loan
proceeds, you all need to sit down and work this out through a
partnership agreement of some kind. Get a lawyer to facilitate it and
work through all the "what if?" questions...what if a partner leaves,
what if he needs to sell the house, what if the daughter dies in a car
wreck. Do not spend one minute on the business until you sort this out
because once things get going it'll drop to the bottom of the to-do
list. If you can't work it out, give back the money until you figure out
another way to secure the loan. If you can't, forget about it...move on.
This is the part where I'm speaking from experience. It's easy to put
off these kinds of discussions forever, and you'll eventually need to
address them when either a) the business folds and there's a risk of
foreclosure or b) the business succeeds and the father/daughter revisit
the question (in court) of how much their share should be. Either way,
your bargaining position, all around, is much better now, before the
fact, and you're much more likely to come up with fair solution.

-Tad


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

SJ wrote:
- quote -

<boggle
What world do you live in? Here in the RealWorld(tm), there's no way
the bank could ever take posession of the collateral without having the
owners signature somewhere.

Why don't I just pledge your house and your car on my loan? I should be
able to do it because in YourWorld(tm) I don't need your signature.

See how silly that sounds? That's because it's absurd, and things don't
work that way. The owner of the collateral must sign something,
somewhere, that states "In the event of default on this loan, we (the
lending institution) can seize this asset". That's just the way it
works.

Tad Borek wrote:
- quote -

correction on that...I meant "j&s liability for the recourse debt" which
means "if the business folds, each of the people guaranteeing the loan
are responsible for the entire debt, even if the creditor decides to go
after only one of them." With this kind of debt the partners need to
work out how to deal with that situation fairly.

-Tad

SJ wrote:
- quote -

Scott,
I can't speak to the legalities, I'm not clear on exactly how the
father's collateral backs the SBA loan (it seems he must be a party to
the loan, signing something...and perhaps, to use some legalese, taking
on joint & several liability for the nonrecourse debt?). But here are my
thoughts...speaking from experience with a similar biz-startup situation...

1. Forget about the fact that the loan officer spilled the beans --
maybe it shouldn't have happened exactly that way but he should have
spilled the beans, IMO. If the father's collateral is what made the loan
happen, the father deserves to know that -- it means the other partners
lack adequate assets to make good on this loan, meaning there's a
bullseye on the house if things head south.

2. Not only that, he deserves to have an inside view of your business
for as long as that lien exists, so he knows when and whether to take
action to secure his property. The reality is that you will have, say,
$50,000 in borrowed funds, or whatever the amount is, in your business
checking account. That balance might rise steadily or it might all be
gone in six months, spent on marketing expenses (which unlike say
computer servers have zero "salvage value" in an asset sale). What
happens then when you fold the business? Apparently you don't have the
assets to back that loan, neither does your other partner. If the
business goes bankrupt, you go your separate ways, and the partner's
father is out a house...because the father has the only asset worth
going after. Point being..if I were him I'd be demanding monthly
financial statements and would take whatever action was necessary to
nail down the cash if there was a sign of trouble. Yes, even if my
daughter was one of the partners. It's a business transaction, business
rules apply.

3. Please take my word on this part. Before you spend a dime of the loan
proceeds, you all need to sit down and work this out through a
partnership agreement of some kind. Get a lawyer to facilitate it and
work through all the "what if?" questions...what if a partner leaves,
what if he needs to sell the house, what if the daughter dies in a car
wreck. Do not spend one minute on the business until you sort this out
because once things get going it'll drop to the bottom of the to-do
list. If you can't work it out, give back the money until you figure out
another way to secure the loan. If you can't, forget about it...move on.
This is the part where I'm speaking from experience. It's easy to put
off these kinds of discussions forever, and you'll eventually need to
address them when either a) the business folds and there's a risk of
foreclosure or b) the business succeeds and the father/daughter revisit
the question (in court) of how much their share should be. Either way,
your bargaining position, all around, is much better now, before the
fact, and you're much more likely to come up with fair solution.

-Tad

"SJ" <skjoy[at]adelphia.net> wrote
- quote -

To put up legal collateral, the father of your female
partner must have signed somewhere. Else how would the
lender be able to seize the collateral if there were a
problem? So are you sure you have all the facts? You might
need to re-read the terms of the loan and /all/ related
documents, including how the father's house came to be legal
collateral. As for the loan officer, I suspect there was a
miscommunication and that he did no wrong in telling the guy
more about the loan terms.

One other issue is whether the father actually has any legal
grounds for demanding a cut of the profits. I would start by
trying to parse all the documents myself, first. If you
can't deduce what is legally owed the father and come to an
agreement with him, and if your partner's father hires an
attorney, then you might have to consider one, too.

I appreciate your comments, thanks
Scott
One final thing I will say, My partners and I would have fully divulged any
information this gentleman would have wanted to him gladly. I simply asked
our loan officer not to do that and he did. I simply asked is this illegal
or ethical. That's all I wanted to know. thanks again
Scott





"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
news:ue7cj29rm4kdi8sr24g4fsrtuadd8jitm0[at]4ax.com...
On Wed, 18 Oct 2006 07:15:27 -0500, "Shhhh" <123[at]456.com> wrote:

- quote -

minute detail about their finances... all hell would break loose.
- quote -

Request to future posters on this thread: Please trim (delete) the
original question on this thread. It has an attachment to it that is
affecting the moderator's software. Thank you.


-HW "Skip" Weldon
Columbia, SC

SJ wrote:

- quote -


I think it's customary that if someone gives you the stakes for a poker
game, they are entitled to *half* the winnings.

- quote -

You're the one who brought up the topic. (I agree with "Shhhh" that you
might as well fold up now and cut your losses.)

Bob

On Wed, 18 Oct 2006 07:15:27 -0500, "Shhhh" <123[at]456.com> wrote:

- quote -

Request to future posters on this thread: Please trim (delete) the
original question on this thread. It has an attachment to it that is
affecting the moderator's software. Thank you.


-HW "Skip" Weldon
Columbia, SC

"John A. Weeks III" <john[at]johnweeks.com> wrote in message
news:john-A76ACE.06545318102006[at]sn-ip.vsrv-sjc.supernews.net...
In article <GpKdncWRVeRELqjYnZ2dnUVZ_uqdnZ2d[at]adelphia.com> ,
"SJ" <skjoy[at]adelphia.net> wrote:

- quote -

By putting up this property, this person effectively has co-signed
the loan. As a signatory to the loan, he is entitled to know every
last detail, and every last crossed-t and dotted-i. And since he
had the make or break item in the deal, he should be getting his
fair share of the profits.

If anyone should be having any thoughts on this topic, it should
be you. You were going put this guy in great risk, and then try
to screw him out of any of the upside rewards of the deal. Not
only is that a poor way to run a railroad, it is a good way to get
yourself strung up in a tree by your gonads.

-john-
"You were going put this guy in great risk". John, I never asked this guy
for a cent. His daughter, having no collateral, simply asked her father to
put it up for her. I can't help if myself and other partner have the
necessary assets to get the job done and she doesn't, but that's not an
issue as she is a third partner in our corp and we want her there. This was
simply the easiest way to get it done, and he brought the whole idea up. He
is also, NOT a co-signer on the loan as his signature appears no where.
And, since I asked our loan officer numerous times if he would not disclose
the terms of our loan to this gentlemen and he told me that he actually
could not without his permission, what does that tell you. This "guy" fully
understand the ramifications of putting his house up and I have coerced him
in no way. I think he's simply doing this for his daughter, and in my
opinion, if he thought is was a bad idea, he's a grown man and shouldn't
have done it. So save your condenseding comments. If you wanted to know
more about the situation, you could have asked. And as far as your gonads..
you can keep em.
Scott


======================================= MODERATOR'S COMMENT:
Please desist with the colorful language.

Sounds to me like you trying to hide information from an investor... imagine if you purchase bonds from a company and they fail to disclose a minute detail about their finances... all hell would break loose.

My suggestion is if you can't be honest with your investors, you won't be honest with your customers and you should just close the doors now.

Shhhh
"SJ" <skjoy[at]adelphia.net> wrote in message news:GpKdncWRVeRELqjYnZ2dnUVZ_uqdnZ2d[at]adelphia.com...
I'm sorry if I'm in the wrong group, I can't find any others that may deal with this topic.

2 partners and I have applied and been granted a SBA loan through a local bank. We then needed a larger amount and they asked for more collateral. One of my partners fathers put up a clear rental property as that collateral, but is not one of the borrowers on the loan. Our loan officer proceeded to tell him that "we couldn't have got the loan without him" and " your contribution is the most of any of the 3 partners". I had explicitly informed the loan officer not to divulge anything about the loan to him and he agreed that it was not his job to do that....but he did, and now this gentleman who lent us the house is demanding a cut of our profits for the life of the loan. Is what the loan officer did illegal or just unethical? Does anyone have any thoughts at all on the topic. thanks
Scott

In article <GpKdncWRVeRELqjYnZ2dnUVZ_uqdnZ2d[at]adelphia.com> ,
"SJ" <skjoy[at]adelphia.net> wrote:

- quote -

By putting up this property, this person effectively has co-signed
the loan. As a signatory to the loan, he is entitled to know every
last detail, and every last crossed-t and dotted-i. And since he
had the make or break item in the deal, he should be getting his
fair share of the profits.

If anyone should be having any thoughts on this topic, it should
be you. You were going put this guy in great risk, and then try
to screw him out of any of the upside rewards of the deal. Not
only is that a poor way to run a railroad, it is a good way to get
yourself strung up in a tree by your gonads.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I'm sorry if I'm in the wrong group, I can't find any others that may deal
with this topic.

2 partners and I have applied and been granted a SBA loan through a local
bank. We then needed a larger amount and they asked for more collateral.
One of my partners fathers put up a clear rental property as that
collateral, but is not one of the borrowers on the loan. Our loan officer
proceeded to tell him that "we couldn't have got the loan without him" and "
your contribution is the most of any of the 3 partners". I had explicitly
informed the loan officer not to divulge anything about the loan to him and
he agreed that it was not his job to do that....but he did, and now this
gentleman who lent us the house is demanding a cut of our profits for the
life of the loan. Is what the loan officer did illegal or just unethical?
Does anyone have any thoughts at all on the topic. thanks
Scott