Royal Custom Designs, a furniture manufacturer in Chino, California, faces potential bankruptcy and job losses due to First Internet Bank of Indiana's refusal to approve a sale to a private equity firm. The company planned to sell its assets to safeguard 142 jobs but the bank contends it is not commercially reasonable. Conflicting views arise over the bank's motives, particularly regarding protecting its $4.6 million SBA-backed loan instead of preserving jobs, raising questions about the implementation of SBA guidelines.
As one of the nation's largest Small Business Administration lenders, the bank is blocking the sale because it wasn't satisfied Royal Custom Designs was commercially reasonable, Sladick claimed.
A sale that preserves 142 jobs, keeps a U.S. manufacturer operating, and offers a better financial return than liquidation is, by any standard, the more commercially reasonable outcome.
We believe the bank's real motivation is to protect its SBA guarantee on the existing loan, said Sladick of the $4.6 million loan with First Internet Bank.
This seems to be a fundamental misunderstanding, or perhaps a misapplication, of the SBA's guidelines.
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