The SurvivalWare Jobs Act of 2011 – “100K, Here to Stay”

My Proposal to Help Small Business

By Rusty Luhring

Small Business Advocate

Founder, CEO of Luhring SurvivalWare, Inc.

Cash Flow Analysis and Projection Software

 The post mortems on Solyndra have been fascinating, to say the least.  I think what we are seeing is a growing mountain of evidence that Solyndra was doomed to happen when the loan guarantee program was created in the first place.  That perhaps expecting government workers to act like venture capitalists is no way to run a railroad.  I have an alternative to the American Jobs Program that I’ve started a crusade for.  It is called the “SurvivalWare 100K, Here to Stay” program.

But first, let’s talk about Solyndra.  It helps make my program all the more compelling. 

Here’s what we know, nearly 30 days after the bankruptcy filing August 31, 2011: 

  • The company may have had a better chance of surviving WITHOUT the loan than with it.  Wait, what?!  That was the gist of a Wall Street Journal Article on page B1, 9/16/2011, “Loan Was Solyndra’s Undoing.”
  • Solyndra Executives spent lavishly.  (“Solyndra’s ex-employees tell of high spending, factory woes” Washington Post 9/22/2011).  Let me do the math.  $500 million+  in federal loan guarantees.  Effective interest rate a little over 1% APR.  Did they sign personal guarantees?  Hard to tell.  And why are they pleading the 5th at the Congressional Hearing?  So who exactly is surprised they spent lavishly?
  • The encircling Republican partisans smell blood in the water, but they are not exactly blameless.  According to Dana Milbank’s column in today’s Washington Post (9/27/2011 pg A8) 

“What McConnell neglected to mention is that Solyndra was cleared to participate in this loan guarantee program by President George W. Bush’s Administration.  He also did not mention that the legislation creating the loan-guarantee program, approved by the Republican-controlled Congress in 2005, received yes votes from – wait for it – DeMint, Hatch, and McConnell.” 

  • Wait, it gets better. 

“Bush’s Energy Department apparently adjusted the regulations to make sure that Solyndra would be eligible for the guarantees.  It hadn’t originally contemplated using the photovoltaic-panel manufacturing that Solyndra did but changed the regulation before it was finalized.”

 You may call that highly suspect.  I call it good pro-active government relations strategy executed by a top notch lobbying firm.  They deserve kudos for early detection of the problem, and successful resolution.  They surely deserve a handsome payday.  And surely the dollar amounts will become published as the investigations continue. 

  • In no way am I absolving the Obama administration.  They are taking this tendency to enact grand plans and appear to “do something” for every ill – to unprecedented heights.  Rushing the Solyndra approval so the Vice President could speak at a photo op (via video feed at that!) was just plain wrong and revealing at the same time.
  •  Who in their right mind would put up with the uncertainty and the restrictions in order to snag one of these loan guarantees?  A year long period of time to negotiate the loan.  Tough luck if business conditions change.  I think it biases the applicant pool away from solid business people and more toward porcine operators used to feeding at the federal trough.
  • No scandal is complete without a mention of Goldman Sachs.  So guess who was Solyndra’s financial advisor?  I hope they were compensated handsomely, for I feel sure their advice on dealing with the Administration and Treasury department was priceless.
  • Final editing before publication: today’s Washington Post (9/28/2011) had a page 2 article about the “Foundation” connected to George Kaiser that was the principal investor in Solyndra.  It was not really a private foundation, and hence has no requirement to pay out 5% of its net assets per year.  Yet apparently gifts of cash and stock to this entity are tax deductible.  And it can use the word “Foundation” in its name.  This is getting off on a tangent – but I do hope we find out who voted for such a ridiculous law.  Thank you Solyndra for bringing this issue to the forefront, under the bright glare of publicity now associated with anything remotely related to your business or government dealings.

The SurvivalWare Jobs Act of 2011

Instead of doling out $500,000,000 at a time to the companies with the best lobbyists, how about chunks of $100k credit lines to any small business owner willing to sign personally.  Give a contract to Capital One to administer the program.  These would be credit cards.  Pre-approved.  Subject to the same penalties and collection efforts upon default as any credit card debt.  Healthy interest rates to cover a higher default rate. 

All you have to do is apply.  Swear under oath this is for a small business.  Agree that you will be a responsible steward and do cash flow projections on a regular basis so that you can avoid trouble and ultimately pay it back. 

As a business owner you would tap this debt only when you had opportunities that would return something higher than the interest rate.  The thing about small business owners in today’s economy is that they have to routinely pass up opportunities due to lack of capital.  If something has a 12 month payback, it doesn’t matter if there is insufficient cash to cover the wait. 

How much would The SurvivalWare Jobs Act of 2011 cost? 

Let’s say we want to help 4 million small businesses. 

At $100,000 each that would be $400 Billion.  Hmmm. That’s less than the President’s Jobs Act Proposal.  And that’s only if all 4 million borrowed the full amount right away.  And 100% defaulted. 

What would the impact of this?  Torrid investment, confidence, and growth.  That’s right, torrid. 

I don’t have an economic model to crunch the numbers and predict the exact number of jobs created, additional tax revenues collected, growth in the money supply, or impact on inflation.  I can tell you though what it would do for the vibrant, diverse, striving community of American small business owners and entrepreneurs.  It would build confidence.  It would show appreciation.  It would spur profitable investment and deliberate risk taking – what this economy needs to pull out of the doldrums.  It would unleash the animal spirits of American Capitalism like nothing else you can possibly do. 

Who am I? 

I’m just a small businessman, trying to make my dreams happen.  I’m trying to change the world, one small business at a time.  I’m trying to improve financial literacy and acumen among entrepreneurs and small business people.   So that their financial management skills become a competitive edge, not a cause for failure in a hostile business climate, stacked to favor heft and connections.  Being nimble financially is critical to our success. 

I want to help other entrepreneurs and small business owners succeed. 

We have a great country, a great economic system, a great democracy.  There are things we can do to unleash the American Competitive Spirit – our can-do attitude, our perserverance.  We want to make it easy for people to start new businesses.  To stay in business once they’ve started.  To add jobs, when appropriate.  To encourage innovation.  Not by prescription.  By reducing friction, and getting out of the way. 

And those things we can do to help do NOT include showering loan guarantees on politically connected companies with incredibly competent lobbyists. 

Frequently Asked Questions 

Q. What kind of paperwork to fill out? 

A. None.  Online applications only. Name, DOB, SSN# all that required.  Nothing about Income, Assets,  or  Debt. 

Q. How long to get approved? 

A. 3 minutes max.  This should be written into the Service Level Agreement with Capital One (or whoever). 

Q. How long before we get access to the cash? 

A. A week to 10 days.  Standard fraud protections and investigation apply.  So do standard upselling pitches by the issuer. 

Q. What are the costs?

A. I’d recommend a standard interest rate of 15.99% the first year of the program. (Re-negotiated annually by Treasury and the credit card company).  Capital One and the government should share in the profits.  The government at minimum earns interest at the rate it is paying on 10 year bonds for any capital tied up in the enterprise. 

Q. Can I start a new business tomorrow? 

A. We’d probably pick a start date to define when you had to be in business to qualify for the full 100K limit.  Start-ups would be treated like student loans – and maybe have a smaller limit initially. ($25,000 to $50,000) 

Q.  What can I do with the money? 

A.  Pay it back eventually.  Other than that, it is up to you.

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4 Responses

  1. While the intent is good… This, like all programs, appears ripe for fraud. Just because you’re a good person and have good intents does not mean that most of the applicants for this would follow through. But, it’s certainly an interesting idea.

    Your proposed interest rate of 15.99% is way lower than that of existing credit cards – and while we would both argue that credit cards should be lower, I do not think that this program should have a lower rate than credit cards themselves. Perhaps since the government is an angel investor, an ownership percentage should go to the government as well. Think GM.

    • Howie,

      You’re probably right about the fraud – which is why I would contract the program out to the major credit card companies; I think they’d have a fighting chance.

      Also, maybe 15.99% is the right tate. Maybe there could be multiple lenders and multiple rates. The rates of credit cards vary a lot – even for an individual. I have some in single digits, some above 20%.

  2. I agree with the 15.99% rate. Bank of America shot me up to 28.99% for no reason. Good credit, not a high balance. Apparently I wasn’t making them enough money. Want to trade numbers? LOL

    As for your proposal, it looks nice on paper. Give it to a politician and watch what happens!

    • Scott,
      I’d love to see the inside of their rate setting model!
      I did send send a link to the article to Sen Mark Warner (Va), and got some boiler plate reply. These two sentences stuck out:

      “I am concerned about allegations that the loan guarantee procedures may not have been followed. With projects of this size and scope it is especially important that we conduct appropriate due diligence and financial reviews prior to committing taxpayer funds.”

      I think he misses the point. The whole program invites cronyism and corruption. I still think it better to hand out millions of smaller chunks.

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