When we got her letter at the end of last year, Rosemary F.
Gozdowski's frustration was obvious.
. . . I have been in business for four years
now and find myself wondering how to get financial help. I have
tried all the routes [suggested] in articles like those you
publish, but the fact is, not everyone is treated equally and given
the help they need . . .
We offered to introduce her to a professional loan packager who
might be able to help. She agreed, and her story unfolded.
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In 1994, Gozdowski, 49, left her six-figure salary in medical
equipment sales. Armed with 25 years of experience in the medical
field, an ultrasound technician's license and $5,000 in
savings, she opened the Sylvania Ultrasound Institute in Sylvania,
Ohio.
After four months in business, Gozdowski went looking for a
$50,000 loan. She was turned down by almost everyone even though
she had strong credit and collateral. Gozdowski believes the banks
were deterred by her company's youth and their perception of
her business as risky. She was finally able to find a bank willing
to give her an SBA Low Doc loan, but even that wasn't all good
news. "I found out I could have extended the terms of the
loan," says Gozdowski. If she had, her payments might have
been much more manageable.
In December 1996, Gozdowski decided to purchase a $200,000
ultrasound scanner--and her financial troubles began in earnest.
When she approached banks for financing, they said her cash flow
wasn't strong enough to support her debt.
Then Gozdowski heard about a new bank, Town Bank, opening in her
city. "I showed them a brief business plan, and the bank said
`Sure, no problem.' They didn't look at my financial
[information]; they didn't look at anything." While she
was skeptical, Gozdowski was also glad for Town Bank's offer: a
$120,000 equipment loan and a $50,000 line of credit to be
increased as necessary. It was May 1997.
What happened next is a gross case of Murphy's Law and poor
banking, says Doug Hood of Rainmaker Capital Corp., the
Cartersville, Georgia, loan packager we consulted. The scanner
Gozdowski originally intended to purchase was discontinued by the
manufacturer. She then went to General Electric Co., which offered
a 4 percent interest rate--much lower than Town Bank's 10
percent. But the loan officer counseled against this option,
convincing Gozdowski she needed a relationship with a bank that
would grow with her.
Town Bank was supposed to make the deposit needed for the
scanner with another loan for $12,000. Instead, in September 1997,
the bank took the $12,000 from Gozdowski's credit line,
promising to replace it later--but that never happened.
In early 1998, Town Bank was put under a cease-and-desist order
by federal regulators--a fact Gozdowski discovered only by reading
the local newspaper. "That left me in a big mess," she
recalls.
It gets worse: Exchange Bank, which bought Town Bank, called her
line of credit due. "They said I didn't have the cash
flow, even though up until then all my payments were made on
time," says Gozdowski. The bank declared her in default
despite her attempts to arrange payments and her warning that
calling the note would send her company into bankruptcy.
In September 1998, Exchange Bank termed the loan out, rolled the
line of credit and equipment loan together, and gave the
entrepreneur a 20-year amortization. "In five years, I had to
either pay off the loan or refinance," Gozdowski says.
"That gave me some breathing time with a lower payment, but it
left me with no cash flow."
Subsequent applications to other banks with a business plan
projecting a 20 percent monthly increase in 1999, on top of her
achieved 30 percent monthly increase for 1998, yielded nothing but
a credit report filled with damning inquiries.
Further complicating her balance sheet were cash infusions from
herself and family members totaling about $32,000--leaving the
company in a negative debt position and making banks even more wary
of lending to her.
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