The Price of the American Dream...Is It Worth It?
In January of 2003 my husband and I were looking forward to the future. I had retired and was finally able to start utilizing my studio (which was a gift from my husband). My husband had a great job that he loved and looked forward to retiring from. Then - BAM - out of nowhere his position was eliminated.
At first he was devastated. then he said, "Oh well, let's buy a travel trailer and see America." We bought our trailer and were getting packed to start our adventure. Before we could leave, my oldest brother approached us saying that he was fixing to lose everything that he owned and needed to get out of the building that he had bought ASAP - could we help? My sister was also having health problems and could no longer drive the long distance back and forth to her job. Her husband was also dying of cancer and we knew it would be a matter of time before we had her to take care of.
Because my husband had just settled the estates of his parents we were in a financial position to help. We agreed to lease/purchase the building from my brother. We live in a city that is just beginning to experience a rapid amount of growth but has few businesses to support it. Because of our many years of restaurant experience, we decided to open a full service restaurant - a first for this city. Everything else to this point had been basically fast food.
Unfortunately for us, during the the process of applying for our SBA loan, my brother signs a buy/sell agreement with someone else for the building. We had to take possession immediately if we wanted it. (And yes, I should have known to run.)
My husband and sister formed an LLC. He owned 66 2/3% and she owned 33 1/3%. (Not bad for a $30,000.00 investment.) Because time and weather was a factor we started construction and remodeling immediately using our own funds. Our banker advised us he would make a loan once we were open to reimburse us our funds used in construction and for the purchase of the building. Below are three things to always remember when starting your business.
Rule #1: NEVER, EVER USE YOUR OWN MONEY OR ASSETS....if you can't wait for an SBA loan or other outside resources of revenue - Run - don't walk away. The business is not worth it.
Rule # 2: Remember the old West addage "Never trust a banker"? We now know what that saying means. Before he was through with us he had mortgaged our home, various parcels of land that we owned, our stocks and the contents of the building; always with the promise that he would release some of the collateral in a few months when he did the consolidation loan. We got the same answer everytime we asked.
We had our business accounts through the same banker. Because 90% of our sales were with credit cards, we soon encountered a cash flow problem. One may dine today and pay with a credit card instead of cash - BUT the small businessman has to wait anywhere from 2 days to 8 weeks for reimbursement. Not only that, he also pays for the "privilege" of accepting that card. (Meanwhile you are paying for the luxury of using that same card.) While he is waiting for his monies to be deposited and trying to operate, he encounters a cash flow problem. Unfortunately that results in having to write checks to stay afloat; which results in exorbitant NSF and overdraft fees. At $30+ for NSF fees and $15+ for overdraft fees on each check that is processed; it does not take long to rack up thousands of dollars in bank charges. Our problem was that our banker did not set us up a line of credit as is customerally done with business accounts. It is not unusual to see monies that are deposited by our credit card companies eaten up in fees as soon as it hits the bank. Once you are behind this eight-ball there is no getting ahead. It's a "win-win" situation for banks and credit card companies.
The majority of credit card companies are owned by the large banks in this country. These banks have developed a great way to increase their bottom line at the consumers' expense. Is there a law that regulates the amount of money they may charge for their services? No. In fact, according to the National Bank Act, they are allowed to charge whatever fees they deem appropriate for their services. Is there an agency to protect the consumer? Yes, supposedly. The OCC (Office of the Comptroller of Currency) - in another words, federal banking regulators. Has this ever been taken to court? Yes. Unfortunately for the consumer some federal banking regulators have given the banks the go ahead to do whatever they want. In the future will we be facing $100 NSF fees or $50 overdraft fees?
Where does this leave the consumer and small businessman? At the mercy of the banks trying to desparately stay one step ahead or like us, trying to 'dig' themselves out of the mountain of debt that their checking accounts have accrued. Is it possible to side-step the banking industry to avoid this practice? Not really. If you are like most Americans and small businessmen today you have already discovered the dangers of carrying cash in our society. Unfortunately, an all cash policy is the only way to avoid this trap that the banking industry has set upon consumers. So NEVER, NEVER, EVER TRUST YOUR BANKER!
Rule # 3: Remember the saying "Never do business with your family or friends". (And yes, we made that mistake too.) When we realized that mentally, my sister was not capable of taking care of the books, we let my brother (yes, the same brother) bring in his friend that set up the books for his business. We later discovered that this glorified 'so-called accountant' was really a computer major. For almost a year he sat in the office doing the 'books', paying taxes, etc. He was always sooo busy.
In the meantime he was developing a relationship with our banker and attorney. Our attorney was handling a problem with our neighbor next door who had brought in truck load after truck load of dirt on his property. While he was 'building up' his property he was burying us. We sat several feet below him. When it rained it smothered our building and parking lot. Unknown to us, this 'so called accountant' was telling our attorney to drop the case; that we weren't interested in pursuing it. He also told our attorney to draw up a document appointing him as manager of the corporation with the ability to dispose of any assets tht he deemed necessary and had it faxed to his job with the city. A phone call would have stopped this had we known what he was doing. We discovered all of this a year later.
In November of 2004, this 'so-called accountant' came to us and said that our banker had decided to release some of our land for him to buy. We asked him what he meant and for how much? Seems as though the two of them had decided that property we had appraised three years before at $40,000; was now going to be sold to him for $25,000. If that was the case, we already had a buyer that we had promised it to. Would you believe the banker would not releae it for us to sell to them?
In December of 2004, we discovered on a Thursday by mail that our banker had told Morgan Keegan to sell our stocks. When asked why this was done, he stated that the 'so-called accountant' told him we were going bankrupt the previous Friday. Said he was protecting the banks' interest. Was it legal? NO! We were not in default on our loan nor had he notified us prior to taking this action. One phone call would have made the difference. We sought the advice of an attorney out of town and were told that yes, we had a lawsuit, but because it would be against such a large bank they would drag it out for years and cost us more money than it was worth. At the time, getting the restaurant on its feet was a priority for us.
A month later the funds from the stock sale were finally applied towards our loan. At this point, because it cut the loan by more than half, we approached the banker about redoing the loan to lower our payments. We were then told that because my sister was a third owner of the LLC, we had to have her signature. Thus we encountered our next problem.
Three months into the venture my sister had become so abusive to the employees that we had to decide between the employees or her. When she tried to strangle one of our Assisant Managers in the middle of the restaurant we had no choice but to ask her to leave the day to day operations to us. She could do the outside marketing. She became furious and created problems from that point on. Things she could have done to help she refused. When we approached her about signing a new loan for less she refused. We were stuck having to pay an outrageous note each month because of her.
My brothers could not understand to what point mentally she had become and insisted that we let her come back to work. When we refused they became upset. However, after having to deal with her on another matter a year later, they came to realize what we had dealt with. Unfortunately for her, she has managed to isolate herself from her three brothers, only sister, only daugther and only granddaughter.
During 2005 we fined tuned different aspects of the restaurant and the menu in order to become more profitable. We were finally showing a small profit this year. Then out of the blue my husband disappears in February of 2006. He opened the restaurant and told everyone he was going to the bank. He never returned. Not knowing if he was abducted and robbed or what, I become frantic. This is totally out of the ordinary for him. For 30 years this man has been "Mr. Dependable." My nephew was able to file a missing person report on him that afternoon. Late that night he returns home. He had started driving and ended up in Shreveport not knowing how he got there. We tell the police that I 'misplaced' my husband and canceled the missing person report. We chalked it up to all of the stress and fatigue that results in operating a restaurant from 9 a.m. to 10 p.m. seven days a week.
I began to notice just how stressed he had become after that and tried to get him to rest as much as possible. He had been handling day to day operations as well as all of the bills, payroll, etc. for over a year while I took care of the creative end of the business. Then the end of March, he disappeared once again. Naturally we were concerned but figured he just wanted some time to himself. We waited three days then filed a missing person report. He called the next day and came home. He had been in Lake Charles just driving around and sleeping in his truck. Canceled another missing person report.
When he got home I began to get him to talk to me about what was going on. It seems as though the 'so-called accountant' had not been paying all of the taxes. At this point we were behind on federal, state and parish taxes. He had been keeping all of this to himself not wanting to upset me. I also found out that someone from the parish had threatened to arrest him. This threat seemed to be the catalyst for his disappearing. I contacted our attorney and was assured that they could not do this. I went to the parish tax office and talked to the manager and a case representative trying to resolve the matter. By now the parish had assessed penalties and interest as well as put a lien on our properties.
We consulted our attorney and he suggested that we do a consolidation loan at another bank. Unfortunately you need to produce your tax returns. Guess who had not done them either? A friend and I began the long process of going back to 2003 and compiling all of the invoices and receipts in order to set up books. What I discovered at that time was just how incompetant this 'so call accountant' had been and how much money had erronously disappeared. The only thing I can say about this man was that he was great at taping receipts on paper and stuffing receipts into some very strange places. It took us from April until the end of August to get everything done and do the taxes. (Thank God we didn't owe any.) My husband brought all of the information to the new banker and completed the necessary paper work to begin the new loan.
Unfortunately the parish had by now taken the business to court. A week before the court appointed date, my husband disappeared once again. Like before, we assumed he needed some time. On the fifth day I once again filed a missing persons report. The next night our son was able to finally reach his Dad on his cell phone (which he had turned off all this time.) He had ended up in Oklahoma City not knowing how he had gotten there or how long he had been there. We talked him into coming home. The next morning we appeared in court with our attorney. She explained to the judge the circumstances and asked that we have a continuance until we heard from the bank.
The business loan process is a long one and a slow one. Properties had to be appraised, debt to income rations had to be considered and a new business plan had to be written. Once again we are faced with another court date. With a letter from the bank that they were still working on the loan the judge issued another continuance. As luck would have it, the bank was not happy with the first appraisal on the restaurant and we had to request a new one. More delays. Once again we faced another court date on the 13th of this month. By now both of our attorneys had approached the Assistant DA on the case and explained the situation. An agreement was made that if my husband would pay x amount of money before the court date the DA would request a continuance indefinitely until we finished the loan.
What I didn't know was that because we had accepted a large catering job that was to be done prior to the court date; ready cash was to a minimum. All foods, etc. had to be purchased prior to the event and we would receive reimbursement afterward. As it turned out, when the time came to pay the parish the required amount of money, there was not enough cash available. Rather than tell me and talk about things, my husband disappeared on the morning of the 13th. I hesitated filing a missing persons report until I realized that maybe this time his state of mind is so confused that we may never see him.
As I look back I now realize just how much pain, despair and helplessness my husband must have been feeling. This is a man who has always taken great pride in being able to provide for his family. A man to whom a handshake is as good as a written contract and his word is his honor. I did not realize just how low his self esteem had become. He 'put on' a good show for all to see including me. I think the realization that he was going to have to tell me that we were going to lose everything was too much for him to bear.
I look back at all of the work, time and energy that we put into this venture. Our hearts and souls were in this restaurant. We had established a name for our food, service and honesty. Sales were up and we were booked solid for the holidays. We were recently featured in Louisiana Life magazine and the Town Talk. We had finally topped the mountain and could see the other side. And yes, it hurts to lose something that you have worked so hard for not because the sales aren't there but from trusting too much and believing that others are as honest as you. But what hurts the most is the loss of my husband.
I have sat here day after day wondering if my husband is dead, alive, hurt, hungry, cold or wandering some street not knowing who he is or where he is. Our son was certain that his father would at least call on Thanksgiving or on the next day which was his birthday. I watched the disappointment on our sons' face when there was no call. How do I tell three little girls one day that their Poppy just walked away and never came back?
Am I angry? Yes. But I can also understand the circumstances that would have pushed him this far. The mind is a fragile thing and I sincerely believe his was pushed beyond the limit. Perhaps I should have been more aware of his feelings and asked more questions. As for me, the bank can take away the material things in our lives but they can't take away the love that I feel for my husband and the deep sense of loss. I would give anything to have him safe at home. Isn't it funny that all of this is a result of us helping someone else out of financial trouble? Would I do it again? Depends on the circumstances.
The American dream..... If by chance you should be considering opening a small business I hope that you will have learned something from our experience. Most people have to face only one major crisis at a time. I am facing three - the loss of my husband, the loss of our home and the loss of our business. So, before you make any decisions, ask yourself "Is the American Dream really worth it?"
Guess what? The brother that we saved from bankruptcy is going to come out ahead in the long run. He will get his building back and can then sell it for whatever he wants. Doesn't matter that we totally remodeled it and added an additional 5000 square feet.