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Bank of America Severing Some Small Business Credit Lines: Sign of Things to Come?
Jan 9th
Bank of America recently made headlines about cutting credit lines of some of its small business customers. An article in the Los Angeles Times quoted two small-business owners (and alluded to some others) that had their lines of credit cut off by Bank of America.
Meanwhile, Bank of America officials denied that their action pertaining to small businesses is widespread. Instead, they claim that it impacts “a very, very, very small percentage” of its small business customers, according to bank spokesperson Jefferson George, as quoted in a Huffington Post article. And they still have 3.5 million non-mortgage loans to small businesses on the books.
While Bank of America said it notified the borrowers who were affected by the call on their lines of credit far in advance, some borrowers who were interviewed said they received no such notification. Those Bank of America small-business customers claimed they were caught by surprise, and unable to pay off the loans or find replacements as quickly as Bank of America was demanding.
But I wondered, is this shades of 2009 all over again, where we can expect to hear tales of small business lending woe everywhere we turn? Are we going to see an across-the-board pullback by lending institutions even deeper than we’ve experienced in the past few years? Or is this an issue specific to Bank of America? Let’s take a look at some additional information.
MultiFunding’s Small Business Bank Report Card shows that small business loans held by banks were reduced by $4.84 billion in Q3 of 2011. The loans that Bank of America called in equaled 8.5% of that alone.
While Bank of America had the largest reduction of small business debt in Q3, loans are still available, experts say, but it all depends on where you look for financing.
Says Ami Kassar, founder and CEO of MultiFunding, smaller community banks are still very much viable options for small business owners looking for financing. ”There are plenty of community banks aggressively building their small business loan portfolios across the country,” he notes.
Others also emphasize sources other than big banks for small-business loans. Rohit Arora, CEO of Biz2Credit, reports that his company is not seeing an across-the-board pullback on lending. He notes, ”Biz2Credit is seeing an increased confidence among small business owners and an increased interest among small to mid size banks along with alternative lenders to lend more aggressively to businesses.”
In other words, Bank of America’s action doesn’t mean credit is completely drying up. But credit is still tighter than other times historically. You may have to be more creative than ever in where you look for funding. Look to your local community banks. Look to mid-size regional banks. Examine alternative small-business financing options as pointed out in an article here on Small Business Trends last month. In addition to traditional banks, consider approaching:
- Credit unions
- Community Development Financial Institutions (CDFIs)
- Accounts Receivable (AR) financers
- Microlenders
Money Questions Photo via Shutterstock
Bank of America Severing Some Small Business Credit Lines: Sign of Things to Come?
View full post on Small Business News, Tips, Advice – Small Business Trends
How to Tell if A Bank Is Committed to Small Business Lending
Dec 24th
When it comes to getting a small business loan, does it matter whether the bank you borrow from is a small bank or a large bank? The New York Times reports that larger banks are making fewer SBA-backed loans to small business, leaving the market open to smaller community banks. But do smaller banks do more for small business?
Ami Kassar, CEO of MultiFunding LLC, thinks they do. In an article on Huffington Post, Kassar was quoted as saying:
“I’d rather deposit my money into a bank that is more likely to take that money and lend it out to other small businesses that need it than to a large multinational bureaucracy that is far less likely to make loans to small businesses that help the economy.”
But do community banks really contribute that much more to their local economies than larger banks with dozens of branches in a single city? Chase, for one, provides grants and investments in communities each year. So does Bank of America. And with deeper pockets than any regional bank could ever have, is it fair to criticize larger banks for not understanding small businesses simply because they’re not small themselves?
Who’s Willing to Lend?
MultiFunding, which advises small businesses on the best loan for their situations, recently came out with a bank lending grader tool. Using the tool, you can find out how small-business friendly different banks are. The tool rates 6,800 banks in the United States. The tool calculates the rating based on quarterly FDIC call reports, as well as the total small-business loan balance for each bank divided by its total domestic deposits.
It assigns each bank a grade (A, B, C, D or F). Most banks (82.5%) get a grade of A or B, meaning that they use at least 10% or more of their deposits to make small business loans. About 1187 of the banks use less than 10% of their deposits to make small business loans — they got ratings from C through F. Figures are based on data as of June 30, 2011. Kassar says:
“The tool will help small business owners find banks in their areas that are most likely to make small business loans. This way they don’t have to waste time at banks that say they’re lending – but aren’t doing their fair share.”
MultiFunding’s tool does not give insight into how much a bank gives back to a particular local community.
How Should You Rate A Bank Lender?
MultiFunding’s tool is a place to start. The information is valuable and takes only a minute to look up.
But Rohit Arora, CEO of Biz2Credit, says there are other ways to judge a bank when looking for a small business loan. He notes these key questions you should ask when you’re considering a loan:
- What is the bank’s underwriting criteria? (credit scores, number of years in business, etc.)
- What industries does it fund?
- What age of business does it want?
- Does the bank make SBA loans or is it a non-SBA lender?
- Will the bank fund startup loans?
The key is to do your homework. Look at a variety of resources out there. The SBA website gives you a checklist to determine what sort of loans or financing you qualify for. If you want assistance finding a loan, consider working with a company like MultiFunding, Biz2Credit or Intuit Loan Finder to work with a loan expert. And there’s plenty of content online, such as what’s found on Paychex’s brand new Build My Biz site.
Bank Photo via Shutterstock
How to Tell if A Bank Is Committed to Small Business Lending
View full post on Small Business News, Tips, Advice – Small Business Trends
How Businesses Bank on Tax Loopholes
Dec 17th
After dealing with filing your own taxes, you probably think companies have to go through a much bigger hassle and have to spend significantly more money. However, this isn’t always the case. Some of the company’s biggest businesses have used loopholes to decrease their required taxes and have even lowered it to 0. A few others have managed to actually make tens of thousands of dollars through tax exemptions and not have to pay a dime. Here’s a breakdown of four major scenarios that might surprise you.
International Income
(Credit)
Interest has surrounded General Electric’s supposed tax cutting maneuvers for years. The New York Times reported that G.E. paid very little in American taxes and claimed $3.2 billion in tax benefits, but a CNNMoney Fortune blog stated that there were inaccuracies in this data (stating that the company said it would not be receiving any tax refund).
Despite the debate and confusion, even that same CNN article says that G.E. “has been an aggressive tax-minimizer” for decades, so this behavior isn’t much of a secret. So how does the company accomplish this drastic feat? By concentrating its profits offshore, G.E. doesn’t qualify for typical U. S. profit taxes.
According to ABC News, Google has used similar tactics. In three years, Google saved $3 billion in income taxes. The profit made overseas never came back to the U.S. and thus didn’t get taxed here. Google funneled its overseas profits through Ireland, The Netherlands, and Bermuda to avoid even overseas taxes.
The Greatest Saver
(Credit)
Pepco Holdings had a company tax rate of about minus 118% in 2010, according to a Washington Post article about a report compiled by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Pepco claimed $270 million in federal tax credits, and paid the lowest rate of all firms investigated in the report.
An author from the study said one way the company could have accomplished this amount of savings was by using accelerated depreciation, but the CFO of Pepco responded in a column stating that while accelerated depreciation reduced taxes, the company paid many other taxes like real estate taxes, payroll taxes, etc.
Made in America
(Credit)
Just because a car has a foreign label doesn’t mean it was built in another country. Many manufacturers based in different parts of the world have plants in the U.S. and assemble many of their vehicles here. The Honda Accord was the first Japanese-branded vehicle built in the U.S. This was back in 1982, and people criticized the decision to start assembling cars here.
Why were people so critical? Because they saw the action as way for the company to avoid taxes and tariffs that would have applied if they were importing the cars instead of building them in the U.S. (whether this was true or not). In theory, it is possible to avoid taxes by simply building the cars in the U.S.
Sign it on the Sea
(Credit)
Some companies can sign documents on international waters, at a certain altitude in the air, or cross state lines to avoid paying tax. In theory, to avoid paying the documentary stamp tax in the state of Florida, someone could possibly send the documents to a person located outside of Florida’s jurisdiction using an online faxing service and complete the transaction there. The tax applies to documents that transfer an interest in real Florida property. Examples include warranty deeds, contracts for gas and oil rights, assignments of contract or agreement for deed, and more.
Conclusion
Gaps in tax law have allowed many companies to make money and sparked many controversies about whether or not laws should be amended. Do you know of any other instances of major tax loopholes leading to major profit? Feel free to share them in the comments.
View full post on Business Pundit
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May 14th
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Study: China Loaned More Than World Bank
Jan 18th
The World Bank issued a little over $100 billion in loans between the middle of 2008-2010, according to research done by the Financial Times. The China Export Import Bank and China Development Bank, on the other hand, loaned at least $110 billion to developing countries during the same period. From the BBC:
The Chinese lenders are so-called policy banks – they have a mandate to further whatever Beijing sees as its national interest. One of China Development Bank’s specific tasks is to try to alleviate and, where possible, eliminate bottlenecks in supplies of raw materials or land for China’s economy. It also tries to open up foreign markets for Chinese companies.
Chinese banks were offering loans to producers of raw materials at a time when it was hard for them to attract financing from elsewhere. That helped secure long-term energy deals, including oil supplies from Russia, Venezuela and Brazil.
The BBC report doesn’t include International Monetary Fund lending, which is at least $50 billion. The point is not that China is lending more than the West–it’s not–but that China is a major lender, and it is using lending to gain strategic advantages and global power. It is, for lack of better words, one of China’s primary global ascension strategies.
Lending also keeps the economy stable. From Forbes’ Shaun Rein:
One reason China’s economy remained robust during the Great Recession is because Bank of China and ICBC loaned money under central government direction to get liquidity into the system. That was undoubtedly good for the economy, but it wasn’t great for investors who will have to deal with years of rising non-performing loans.
Speaking of investment, Rein also mentioned that many big Chinese companies have serious transparency issues, and investing in them directly is a very risky proposition. And the BBC article noted that Chinese companies are still reluctant, or flat-out not allowed, to take part in much foreign direct investment.
This tells me that China, while pursuing a global economic strategy similar to the one that helped the West gain political power, is still hamstrung when it comes to being fully open for international business. It’s premature to call China the global power for this reason. Rather, it is on a tempered, politically-moderated ascent.
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Norway Investigates Muhammad Yunus’ Grameen Bank
Dec 2nd
Image: World Economic Forum/Flickr
Nobel Laureate and Grameen Bank founder Muhammad Yunus is under investigation for diverting nearly $100 million in grant money from microcredit lender Grameen Bank, for which the money was intended, to Grameen Kalyan, a branch that helps Grameen members stay healthy. Yunus, who heads 30 non- and for-profit organizations under the Grameen umbrella, is denying the allegations. From the BBC:
A documentary maker has alleged that cash was diverted from Professor Yunus’ Grameen Bank to other parts of Grameen. (Filmmaker) Mr Heinemann’s report alleged that after the Norwegian authorities raised objections to the alleged transfer of funds, the Grameen bank returned about $30m. The aid money was from Norway, Sweden and Germany.
In a statement, the bank said that the allegations were false. It said that a full explanation with more details would be provided at the “earliest convenient time”.
The move by the Norwegians – who insist that no criminal activity has taken place – comes at a time when the reputation of the micro-credit industry has been under attack. The original aim of the micro-credit concept was poverty reduction, but in recent years some micro-financial institutions have been criticised over exorbitant interest rates and alleged coercive debt collection.
Reacting to the latest report, the Norwegian authorities say they have no suspicions of tax fraud or corruption committed by Grameen Bank. “Having said that, the Government of Norway finds it totally unacceptable that aid is used for other purposes than intended no matter how praiseworthy the causes might be,” Norwegian International Development Minister Erik Solheim said in a statement e-mailed to the BBC.
I saw Yunus speak several years ago. He’s one of those very rare people who I think is incapable of corruption. Heinemann, the filmmaker, created a documentary that investigated how microcredit institutions around the world are basically turning into loan sharks. It’s part of his job to uncover indiscrepancies and make them public. But if Yunus’ Grameen did something wrong, I have real trouble either seeing it as intentional corruption or seeing Yunus behind it. It’s akin to Ghandi being corrupt. I’m interested to see what happens next with this investigation.
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5 Ways to Incentivize Your Employees – Without Breaking the Bank
Oct 6th
While bonuses, paid holidays and other formal employee benefits are good for business, they are not a guarantee of employee or team performance. In fact, studies have proved that “soft” benefits, such as employee incentive programs, are directly responsible for driving increased efficiencies and productivity among employees.
And while “employee-friendly” business practices have traditionally been perceived as frivolous or a distraction, when structured and managed effectively they not only boost morale, but produce motivated teams dedicated to the success of your business.
A formal employee incentive program, or even elements of it, needn’t break the bank. Here are five ways you can incentivize your employees.
1. Introduce flextime.
Allowing your employees to enjoy more flexible schedules is a great incentive for attracting and keeping high-performing employees. It doesn’t mean that they work less time; it just means they have the benefit of working the hours that you mutually agree on outside the traditional confines of a 9-to-5 work day. Flextime won’t work for all businesses or all employees. Here are some tips for balancing your business needs with those of your employees:
- Determine who is eligible for flextime: If you want to offer this benefit but are concerned about rolling it out to all employees, consider establishing eligibility based on performance or tenure.
- Set acceptable and universal guidelines: Start by consulting employees on their needs; then develop and communicate a set of guidelines that is realistic for all. For example, you might choose to offer your employees the option of starting or leaving work one or two hours early on certain weekdays. If you do so, make sure your employees can make up those hours during the rest of the week.
- Establish procedures: Ensure that your flextime policy includes a process for reviewing requests, scheduling and ensuring coverage.
- Monitor the program: Once your flextime program is under way, take time to adjust it and iron out any kinks. Assess whether performance has been affected or the program been abused.
2. Offer employees corporate memberships.
Whether it’s a discounted gym membership or access to an executive suite at your local sports arena, corporate membership programs can help promote employee well-being as well as help to facilitate business relationships when used as vehicles for client entertainment.
Before you rush into buying the membership that appeals to you, consult your managers or employees and try to gain consensus on their preferences. Again, you may want to offer these perks based on performance or tenure. Don’t forget, if you do use corporate memberships for any form of client entertainment, you can claim customer entertainment expenses (including meals) as a business tax deduction, as long as there is a clear business purpose and substantial business discussions are held before, during or after the entertainment. The tax deduction is generally limited to 50 percent of the expenses incurred. Read more about business tax deductions at Business.gov. Also talk to your accountant about other deductions you can gain by implementing employee incentives.
3. Look after those that matter to your employees.
Show your appreciation for your employees by involving their families in their work life and work-related social activities. From family movie nights to “bring your child (or pet) to work days,” these activities can go a long way to making good on your commitment to, and appreciation of, your employees and those who support them.
4. Spiff your team.
Just as sales teams get “spiffed” or compensated for closing a major deal, why not incentivize employees across all your business functions for completing critical projects or reaching certain goals? Incentives aligned with individual achievements or team-based success can go a long way to aligning and motivating your employees around your business objectives.
5. Show you take your employees’ wellness seriously.
For a small business, losing just one employee to frequent sick days or a prolonged illness can be frustrating and a drain on resources. Consider implementing a workplace wellness program. Not only will it help educate your team about all aspects of wellness (physical, mental and even fiscal), it will go a long way to showing you’re investing in them for the long term, and make for a more empowered and happier work force.
Workplace wellness programs don’t have to be all about posters, flyers and doctrine about how and how not to live your life. If you tie them to other incentives and perks – for example, extending the lunch hour once a week to allow employees to take a “30-minute power walk,” or offering prizes for quitting smoking – they can be inclusive and something to get excited about. You might even come up with a calendar that emphasizes a weekly wellness initiative, such as “greening” your work space one week or changing your snacking habits the next!
This article from Dawn Rivers Baker offers more ideas: “10 Steps to a Microbusiness Wellness Program.” The CDC’s Healthier Worksite Initiative offers more information, resources and step-by-step toolkits to help you improve the health and morale of your employees through workplace wellness programs.
5 Ways to Incentivize Your Employees – Without Breaking the Bank
View full post on Small Business News, Tips, Advice – Small Business Trends
Toshiba, Nintendo Bank on 3D
Oct 4th
Toshiba just announced that it will release two new glasses-free 3D TVs in Japan this December, a 12-inch and a 20-inch. The announcement comes on the heels of last week’s Nintendo 3DS handheld gaming device details. PCWorld has more on Toshiba’s new 3D TVs:
Toshiba’s new TVs have a thin sheet of small lenses in front of the display. Behind this lens screen is a custom-developed LCD (liquid crystal display) panel. Each screen has 8.29 million pixels — four times the number of pixels in a conventional “full HD” television — organized into groups of nine pixels of each color. The nine lenses split light from each bank of pixels and send it to nine points in front of the TV
If the viewer sits in one of these sweet spots they get the 3D illusion. The nine spots should enable several family members to watch a 3D image at the same time.
(The TVs will) cost around ¥120,000 (US$1,430) and ¥240,000 respectively. The company is waiting on larger screens before it launches the TVs outside of Japan, said Masaaki Oosumi, president of Toshiba’s digital media network unit, at a news conference. Markets such as the U.S. demand televisions with screen sizes starting at about 40 inches, making these first models a little small.
CNN covers Nintendo’s 3DS handheld gaming device, which will debut in next February in Japan for about $300, and will arrive in the US next March:
Unlike 3-D games for the PlayStation 3 or those utilizing NVIDIA’s 3-D Vision technology, which adds three-dimensional special effects to PC titles, software for the Nintendo 3DS doesn’t require the use of cumbersome stereoscopic glasses.
Fans also don’t have to pay for expensive hardware upgrades such as a 3-D TV or custom graphics cards. Both are major hurdles that have thus far kept players from hopping on the 3-D bandwagon en masse, and game makers from following in large numbers.
The device is better suited to the briefer, more mobile gaming experiences that define current gaming trends and appears better poised to satisfy both casual and hardcore video game fans than its competitors.
Additional support for 3-D TV shows and films should further buoy the Nintendo 3DS’ popularity as a portable entertainment device. The gadget also offers the benefit of on-demand game updates and downloads via Wi-Fi connection.
Screen Digest says that 28% of homes will have 3D TVs within the next four years, according to this Screenrant post. That estimate seems high at today’s costs, but if manufacturers can improve technology while driving prices down, that could be a viable estimate.
Screenrant also makes the point that studios are hesitant to release 3D Blu-rays or DVDs. They want to wait until more people have 3D home entertainment systems, which in turn would make margins more secure.
It also looks like mobile developers are jumping on the 3D bandwagon, with new silicon and software platforms that enable mobile viewers to see content in 3D on their phones and tablets.
I had my doubts about 3D until reading about Toshiba and Nintendo’s glasses-free versions. As long as the companies with an interest in this technology can persuade consumers that it’s the next big thing, they’ll be able successfully upcharge for it and, if all goes well, even standardize it. Consumer reception will be 3D’s X-factor for the next year or so.
View full post on Business Pundit
Vatican Bank Under Investigation for Money Laundering
Sep 21st
Image: Vvillamon/Flickr
Police are investigating Vatican Bank (a commonly-used name for Istituto per le Opere di Religione, or IOR) CEO Ettore Gotti Tedeschi on suspicion of money laundering. From the BBC:
Prosecutors also seized 23m euros ($30m; £19m) from the bank’s accounts with another smaller institution. The inquiry was launched after two suspicious transactions were reported to tax police in Rome.
The BBC’s David Willey in Rome says the Bank of Italy’s financial intelligence unit tipped off Italy’s tax police last week, after two suspicious transactions were reported between the Vatican Bank and two different Italian banks.
The tax police seized one deposit of 23m euros that the Vatican Bank had deposited with a small Italian bank called Credito Artigianato, our correspondent says.
“The bulk of the money, euro20 million, was destined for JP Morgan in Frankfurt, with the remainder going to Banca del Fucino,” according to the AP.
“The Vatican Bank, known officially as the Institute for Religious Works, was created during World War II to administer accounts held by religious orders, cardinals, bishops and priests,” writes the BBC. As part of his job, Tedeschi reports to cardinals and the Pope himself. All of the bank’s profits are intended for religion or charity.
The Vatican Bank also has a history full of scandals (AP):
The Vatican bank was famously implicated in a scandal over the collapse of the Banco Ambrosiano in the 1980s. Roberto Calvi, the head of the Banco Ambrosiano, was found hanging from Blackfriars Bridge in London in 1982. The circumstances remain mysterious. Italian prosecutors maintain he was murdered, but there have been no convictions.
Last year, a U.S. appeals court dismissed a lawsuit against the Vatican bank filed by Holocaust survivors from Croatia, Ukraine and Yugoslavia who alleged it had accepted millions of dollars of their valuables stolen by Nazi sympathizers.
Vatican Bank fraud is nothing new. But, thanks to the Vatican’s status as a city-state, taking action against those crimes is difficult. From the New Statesman:
The Catholic Church is the only religion that is permitted – under international law as interpreted by the Foreign Office, and at the United Nations – to claim the privileges of sovereignty and statehood. These are considerable: both the Vatican and its leader have immunity from civil or criminal actions for the damage that they do to others – whether by trafficking paedophile priests or by condoning fraud at the Vatican Bank (suspects can avoid European arrest warrants by staying within the “inviolable” walls of the Holy City).
At the UN, which has…allowed the Holy See to do everything a nation state may do except vote in the General Assembly (where it is nonetheless accorded six seats from which to speak and lobby), the Church’s advantages over other faith groups are enormous.
“The Holy See expressed “surprise” and “bewilderment” at the operation, and has “full confidence” in Gotti Tedeschi,” writes Bloomberg. But if authorities find evidence of wrongdoing, someone’s head is going to roll.
Ready for another book, Dan Brown?
View full post on Business Pundit
