Posted by David Rhoads on Wed, Jun 16, 2010 @ 11:38 AM
Part 1 Where's the Bank Credit?
Why the only businesses getting loans right now are the ones who don't need them.
The point of all that TARP money funneled to banks beginning in late 2008 was to end the credit crunch. And in recent months at least three of the country's biggest lenders have announced ambitious plans to ramp up lending to small businesses this year. Yet, a year-and-a-half after the bailout, as the economy finally seems to be lurching into some sort of recovery, some untold number of America’s millions of small companies are still trying to get their hands on the capital they need.
So are banks back in business … or not?
Big banks promised to make more small business loans but haven't.
Photo credit: Flickr/TheTruthAbout...
Although Wells Fargo, Bank of America and JPMorgan Chase pledged to make significantly more loans this year, it may be easier said than done. Bank of America, for example, lent $3.4 billion to small businesses in the first quarter of 2010, which is actually down from the $3.9 billion extended during the same period last year.
Part of that decline may be attributed to demand, which at Bank of America has only started to pick up in the last few months, according to spokesman Jefferson George. “When businesses are struggling, they’re not necessarily looking to extend themselves further,” he says.
But what about those who do? “There is ample credit availability right now,” says loan consultant Ed Freiermuth. “For any business that’s qualified. What’s a ‘qualifiedbusiness’? That’s the meat of it.”
Now's the Time to Get Creative
Banks have been given money to shore up their balance sheets and reserves, but even while they’ve been pressured to lend, they’ve also been warned not to make bad loans.
“Regulators are looking over their shoulders saying, ‘Fine, lend money, but if you screw up, you’re going to be in trouble,'” explains Freiermuth. In his experience, underwriters are being much more exacting in their evaluations, and the effect is a contraction of lending parameters. From his perspective, it’s a throwback to “old school” banking, in which bankers gather reams of data and go strictly by the numbers to winnow down applicants to those that have little probability of going south.
From the bank’s perspective, according to Bank of America's spokesman, it’s not so much that the criteria has changed, but the fact that what borrowers bring to the table doesn’t hold up like it once did — cash reserves might be depleted, collateral may have lost value.
However you look at it, the upshot is largely the same. “In essence, the only people who can get credit are small businesses that don’t need it,” says small-business advisor Chuck Blakeman. “Profitable for the last two years, perfect financial shape? No problem.”
Anyone falling outside those bounds is going to have to embrace an economy with new, tougher rules — and become just as creative about finding credit as they were about their entrepreneurial vision in the first place.
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Eric Hagerman is a New York-based freelance writer and editor and former senior editor at Popular Science and Outside magazines.
Posted by David Rhoads on Tue, May 11, 2010 @ 04:20 PM
Whatever your potential sources of business finance, the changes in our economy and business climate have forced several new common factors on all businesses:
1. You should explore several options in detail. The days of simply assuming that your
current bank is the sensible source for your finance are gone.
2. Explore the short-term and long-term implications of your chosen finance route.
Short-term cash gains might be very useful – sometimes essential, but do your homework
on the longer term implications.
3. Shop around. Finance is like any other business service. The quality of service provided, the details and terms of the package offered and the full cost of the package do vary from lender to lender – don’t assume that all other offers will be the same.
4. Negotiate. Again, business finance is no different from other business services.
Don’t accept terms immediately – negotiate. Look at the overall cost to your business and
other factors such as seasonal cash flows. Demand better terms, payment holidays etc.
to suit your business. It’s your loan/finance – negotiate to get terms that favour your
business.
5. Prepare your business case well. Have others comment on it before going to your
chosen lender. Include enough information in your plans, proposals etc. to give the lender
everything they need to know to be able to make a decision. If the lender comes back
and requests further information, then you clearly have not enabled them to make the
decision with the information you initially provided. Include information on risks and
how you will mitigate the risks. Present your information clearly and back it up with bank
statements, key contracts/orders etc.
6. Provide regular, clear and complete updates to your bank/lender. Provide management
accounts, trading updates. Banks and other investors don’t like surprises. Keep them informed. If your information is clear and regular, the door will be open to finance discussions.
Posted by David Rhoads on Mon, Mar 29, 2010 @ 04:49 PM
Out of the 1000’s of lease applications we review, the number one thing our customers can do to improve their credit profile is update their Dun & Bradstreet Report. Blue Street’s team of credit professionals will guide you through the simple reviewing and updating process.
As you may know, D&B is a publicly traded company that provides information on businesses and corporations. Often referred to as just "D&B" the company is best known for its "D-U-N-S Number" identifier that is assigned to over 100 million companies worldwide.
It is critical that before you begin the process of leasing or financing equipment that you are confident you have a positive D&B profile on record. The first thing a bank checks when reviewing applications is your company’s D&B profile. Your profile gives the lender a snapshot of both your business and credit history.
How do I know if my D&B profile is up to date and accurate?
Call us. Blue Street Capital will pull your D&B (while you are on the phone) and explain to you how your report looks from a lender's perspective, describing all of the positive and negative aspects of the report and what you can do to remedy any potential problems. We do this free of charge. Unlike a credit report, looking at your D&B report has no affect on your business or personal credit.
Call us at (714) 316-1180 and ask to speak with an account representative.
What if my D&B contains mistakes?
If there are any "negatives" regarding your credit history, don't worry - remember that Blue Street Capital has options for all types of credit. Even the most responsible businesses have credit blemishes that we can work around.
If D&B reflects something negative about your business that you know to be inaccurate, we will explain to you how it can be fixed. Again, Blue Street Capital provides this service free of charge.
What if I don't have a D-U-N-S number?
If you do not have a D&B profile, it's not a show-stopper. But having a favorable credit history listed in D&B will go a long way for you in getting the lowest rates on your equipment leasing or financing. If you are new to D&B we can help you understand how to setup a profile and why this is an important tool for your business.
Contact us today for your FREE D&B Consultation!
Posted by David Rhoads on Fri, Mar 26, 2010 @ 12:56 PM
Real gross domestic product in the United States increased at an annual rate of 5.6% in the fourth quarter of 2009 over the previous quarter, marking the best performance in six years. In the third quarter, real GDP increased 2.2%.
Nonetheless, fourth quarter GDP fell just short of economists' estimates. Seventy-six economists surveyed by Bloomberg News forecast an annual growth rate of 5.9%, the same as the government's "second" estimate released last month.
The Commerce Department's Bureau of Economic Analysis said the increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, personal consumption expenditures (PCE), and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, an upturn in nonresidential fixed investment, an acceleration in exports, and a deceleration in imports that were partly offset by decelerations in PCE and in federal government spending, the BEA said.
The economy's end of year surge was not enough to reverse a record poor performance in 2009. For the full year, real GDP decreased 2.4% from the 2008 annual level, making it the worst single-year performance since 1946.
The decrease in real GDP in 2009 primarily reflected negative contributions from nonresidential fixed investment, exports, private inventory investment, residential fixed investment, and personal consumption expenditures (PCE) that were partly offset by a positive contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
The downturn in real GDP in 2009 primarily reflected downturns in nonresidential fixed investment and in exports and a larger decrease in private inventory investment that were partly offset by a larger decrease in imports and a smaller decrease in residential fixed investment.
Fourth-quarter corporate profits increased by $108.7 billion to $1.47 trillion. Earnings jumped 31% from the same period in 2008, the biggest such increase since 1984.
Click here to access the Bureau of Economic Analysis report on GDP.
Posted by David Rhoads on Wed, Mar 24, 2010 @ 12:51 PM
***UPDATE*** posted March 17, 2010
The HIRE Act - 'Hiring Incentives to Restore Employment Act' passed on a bipartisan Senate vote of 68-29 extending the enhanced Section 179 deductions of 2008 and 2009. Businesses can now write-off up to $250,000 of qualified property during the 2010 tax year - subject to a phase-out if a business has capital expenditures exceeding $800,000.
Posted by David Rhoads on Mon, Mar 01, 2010 @ 10:39 AM
Business owners who acquire equipment for their business: machinery, computers, and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than a little at a time over a number of years. This deduction is known by its section in the tax code, a Section 179 deduction.
Under Section 179, businesses that spend less than $530,000 a year on qualified equipment, may write-off up to $134,000 in 2010. The rules are designed for small companies, so the $134,000 deduction phases out when a business purchases more than $530,000 in one year. (Companies cannot write off more than their taxable income).
Benefits of a Non-Tax/Capital Lease
The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: expense up to $134,000 if the equipment is put in use in 2010. In addition, you may depreciate any excess on the depreciation schedule for that asset. Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease. Example: Assume you finance business equipment, put it in use in 2010, and take advantage of Section 179. Your tax savings could be significant:
Tax Savings Example - Section 179 Deduction
Cost of Equipment: $250,000.00
Section 179 Deduction if Purchases are $530,000+ $ -
(Dollar for dollar phase out if over $530,000) $134,000.00
Section 179 Write-Off Amount: $134,000.00
Regular First Year Depreciation Deduction: $23,200.00
Total First Year Deduction: $157,200.00
Cash Savings on your Equipment Purchase: $55,020.00
(Assuming a 35% Tax Bracket, Depreciation 5 years)
Lowered Cost of Equipment after Tax Savings: $194,980.00
Tax Code Section 179 & Election to Expense Detail
The election, which is made on Form 4562, is for the tax year the property was placed in service or an amended return filed within the time prescribed by law. The total cost of property that may be expensed for any tax year cannot exceed the total amount of taxable income during the tax year. Section 179 property is property that you acquire by purchase for use in the active conduct of your business. To ensure property qualifies, reference Publication 946.
This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed by December 31st. Non-Tax leases qualify for this deduction in their year of inception. Any excess above the expensed amount can be depreciated depending on the equipment type. Not all states follow federal law. Contact your tax advisor for further detail or visit www.irs.gov for specific detail.
Tax/True Lease Benefits
If a lease is a Tax Lease/True Lease, the lessor retains ownership and you, as the lessee, may be allowed to claim the entire amount of the monthly investment as a tax deduction. Many rental contracts qualify as a true lease including a 10% Option and a Fair Market Value Lease.
Example Calculation: Assume that you have a Tax/True Lease with a $1,000 monthly payment, the below tax savings that may be available:
To take advantage of the incentives and the substantial tax savings, your business equipment must be put in use by year-end. Please contact your tax advisor to learn about the specific impact to your business.
Interested in learning more? We’ll provide you with a free consultation and extend finance solutions so you can acquire the business equipment you need. Contact us today!
Posted by David Rhoads on Wed, Jan 13, 2010 @ 10:52 PM
Tuesday, Jan. 12, 2010
Analysts: Tech Sector to Recover in 2010
By AP / BARBARA ORTUTAY
(NEW
YORK) — The tech downturn is over and a recovery is on the way after a
"dismal" 2009, as companies resume spending on computers and software,
according to a new analysis.
Forrester Research Inc. was
set to report Tuesday that it expects global spending on technology
products and services to grow 8.1 percent in 2010, to more than $1.6
trillion. U.S. spending is expected to rise 6.6 percent, to $568
billion. Get the latest tech news at Techland.com.
The
projected increases follow sharp declines in 2009, when businesses and
governments slashed their purchases of PCs, computer peripherals and
communications equipment in response to the economic turmoil and credit
crisis. Many large tech companies, such as Microsoft Corp., remained
profitable and increased their stock prices in 2009, but often they
relied on layoffs and other expense reductions to do it. See TIME's tech buyer's guide of 2009.
Even
with the expected rebound, "the level of computer equipment purchases
in 2010 will still be lower than in 2008 or even 2007," said Forrester
analyst Andrew Bartels.
With the recession over, pent-up
demand for new computers and updated software programs stands to
benefit the companies that make them. The October launch of Microsoft's
latest computer operating system, Windows 7, also gives companies a
reason to start replacing PCs.
Still, Forrester cautioned that growth will start slowly and pick up later in the year.
The
research firm also expects spending on communications equipment to pick
up this year, partly because of demand in emerging markets that are
building wireless and broadband networks. See 25 websites you can't live without.
Forrester
is not alone in predicting a rebound for the year. Last fall Gartner
Inc. forecast 3.3 percent growth in global technology spending. Another
analyst firm, IDC, said in December that worldwide tech spending would
grow 3.2 percent in 2010, returning the industry to 2008 levels of
about $1.5 trillion.
More insight into the sector's
recovery should come Wednesday, with the release of figures on PC sales
in the fourth quarter, and on Thursday, when Intel Corp. reports
earnings for the period.