Summer is a particularly tough time for the meal assembly business. Many people take the summer off, and trying to retain customers is difficult. Combine that with the state of the economy and no cash reserves, and that made last summer our first and last. We didn’t actually close our doors under mid-October, but the writing was on the wall. I won’t go into the gritty details, but I will say that we made the decision very quickly, at a point where we could pay our employees, refund or provide food to our customers, and help out some of the other Dream Dinners owners nearby. So we no longer own Dream Dinners in Hagerstown, and that started all of this (unless you count me knocking up the Boss earlier in the year).

Then comes Kaylee Elizabeth. Our second beautiful daughter was born on October 22, and she is as sweet as her sister. I never did think I wanted kids before I met the Boss, but I think being Daddy is the best, and this little Kaylee-bear makes it even better. Life was a little rough for the first few months, as she was colicky and had a bad case of acid reflux. Now she’s cutting her first teeth, working on her first word, and crawling everywhere. She is quite chatty, which is no surprise if you know Bella.

While we were adjusting to life with Kaylee, we were still dealing with the financial implications of closing the business. We had a 10 year lease, a $220k loan, outstanding vendor invoices, and royalties, all of which we had to personally guarantee. This meant that declaring personal bankruptcy was a foregone conclusion. Maybe in the near future I’ll talk about that process a bit, but the wild card here was that we also had over $370k in mortgages on a house that was worth much less. Combine that with a 90 minute commute each way, all the time and money costs of home ownership, and the Boss and I had a very hard decision to make. The bankruptcy gave us a chance to walk away from the house, and we did. We moved back to Virginia, just 8 miles from my office, into a rented townhouse.

Needless to say, this has taken a bit of adjustment. We’ve gone through several rounds of getting rid of stuff that we didn’t need. We still have a garage and a storage unit full of boxes. We miss our big kitchen and yard, but we don’t miss having to take care of a house that was poorly built. Not to mention that it takes me 15 minutes or less to get to and from work. There is just no price I can put on getting back 10 hours a week of my life. Even this close to these hard choices, there is nothing in the world I would trade for 2 hours a day with my girls.

I’ve barely scratched the surface here. There is just so much to talk about, and my head is finally clear enough to do it. Yes, I am still going strong with GTD, and I have that to thank for being able to make most of these decisions and know for sure that I am doing the right thing. Expect to hear more on that soon.

Basically, the ARC program provides loans to viable businesses up to $35,000 to be used for principle and interest payments.  You can use the money to pay other loans (within certain limits, credit card debt, capital leases, notes payable to suppliers, and even personal mortgages or home equity lines if you can show the money was used for your business.  But the best part is that the loans are 100% guaranteed by the SBA, payments are deferred for 12 months, they have no fees, and no interest to the borrower.

Let me repeat that again, because I’m not sure you got it.  It’s a 5 year interest free loan that you don’t have to start paying back for a year.

Now, what’s a viable business?  This is where things get confusing.  The basic hard criteria are that you have to have been in business for 2 years, you have to have been profitable (or had positive cash flow) for at least one of the last 2 years , and you have to have quarterly projections for the next 2 years that show you will have sufficient cash flow to meet your debt service.  Once you’ve got that, they’re going to look at both your business and personal credit and do a calculation (which they’re not sharing).  But that’s not a fixed criteria.  Even if your credit score doesn’t quite match, it just means they’re going to take a harder look at your business numbers.  The loan plan is very flexible in this regard.

Since the loans are 100% guaranteed, banks should be very willing to make loans.  Collateral is not required by the SBA, but your bank might want it anyways.  And there’s a little something in it for the bank, as well, as there is actually interest on ARC loans (to the tune of prime plus 2%), but it’s being paid by the SBA.  So that’s how you, as a borrower, get an interest-free loan.  The bank has some discretion on how the funds will be used and paid, as well.  The guidance from the SBA is that the proceeds must be used in the best interest of the borrower, and not the bank.  So if you have a vehicle loan with the bank, and a high interest credit card balance somewhere else, it’s probably in your best interest for the credit card to be paid off, and the bank has to do that instead of what is in their best interest (which would be to pay off the vehicle loan).  The bank can also either pay out the entire loan up front, or space the payments out over 6 months.  Again, it’s whatever is best for you as the borrower.

There’s a good bit of information on the SBA website about this program, and one of the best things there is the ARC Loan Procedural Guidance document.  This doc may be a little dry, but it’s exactly what the banks will be working from in determining eligibility.  It’s also worth noting that even if you don’t qualify for ARC, there have been other changes to the SBA programs lately that will benefit business owners greatly.  One of the biggest is that the 7(a) loan program has been changed from a 75% guarantee to a 90% guarantee (which means less risk for your lender), and the fees have been reduced.

Dream Dinners is doing well for us.  Since we opened almost eleven months ago, our sales have rapidly trended up.  April was a fantastic month, and we nearly made it to profitable month over month.  Then came May.  We knew that summer was a traditionally slow time for the meal assembly business, and we thought we were ready for it.  And the truth is, compared to other franchise locations across the company, we are still right in line with our trend.  But when you don’t have enough money in the bank to pay all the bills, and you need to start deciding whether you’re going to pay the employees or the suppliers first, it doesn’t really matter what the trend looks like.  One of my few buttons is money.  When it’s tight, I get stressed easily.  I have the tendency to just shut down for a while, and that’s exactly what I did.  Add to that the fact that my day job was giving me a bit of a headache at the same time.

Then I got my head back in the game.  There is no way I am going to give up and walk away merely because we’re having a hard time finding working capital.  While I’m willing to make the decision to stop throwing good money after bad if it ever comes down to that, I know from looking at the financials every day that that is not the problem right now.  As long as the trend holds, the fall is going to completely blow up for us.  We just need to get to the fall.  So we have a problem to solve, but it’s not a show-stopper.

I’ve got a plan ahead of me.  I may have gotten shot down in one phone call today with our current lender (who now has a minimum loan amount of about 8 times what we need), but I immediately followed that up with phone calls to the SBA, another bank, and the local development council.  Tomorrow I’m taking some time to go and talk to people in person, and there’s a meeting tomorrow night about the SBA’s new loan programs.

What they say about success is absolutely true.  It’s 90% perspiration.  Bring it.