By Nick Leiber
Torrey says she can't bring in enough workers to tend to her vegetable fields Heather Johnson
Maureen Torrey, the 11th-generation owner of a vegetable farm in upstate New York, doesn't have much in common with Atul Jain, the New Delhi-born founder of 14-year-old Global Software Solutions, an IT consulting firm outside Washington, D.C. Yet both say they're suffering from an increase in government obstacles to hiring foreigners. "We're in a crisis situation as we see no action by Washington," says Torrey, 58, who recently cut back the land she plants by more than 10 percent, to 6,700 acres.
For years both companies have hired foreigners on temporary visas because they say they can't find Americans with the skills they need. Now they're struggling because it's getting harder to obtain visas for potential employees. Torrey Farms has lost money for the past two years because Torrey says she can't bring in enough workers to tend her crops. Jain says sales will be flat this year and he may have to send work overseas. "We let opportunities go, our workforce shrank, and our profit and revenue have gone down," says Jain, 44, who can't find Americans with tech skills and the desire to spend months at far-flung job sites.
Companies had hoped comprehensive immigration reform would make it easier to hire foreigners. In the absence of action by Congress, though, the federal agencies in charge of approving employment visas are making them harder to get, according to immigration lawyers and advocacy groups. The advocates argue that businesses seeking to legally bring in temporary workers from overseas are being hurt by tighter enforcement of regulations by officials who handle visa applications. Robert Groban, an attorney with law firm EpsteinBeckerGreen in New York, says the agencies are under pressure due to worries that "foreign nationals are taking the place of U.S. workers," and are reacting to the political climate. IT consultant Jain's response: "The economy will not improve just because foreign workers can't come."
Small businesses are particularly hard-hit because they lack the resources large companies have for managing visa applications and because it's harder for them to set up foreign operations to take advantage of cheaper labor abroad. "There's a new attitude [that is] arbitrary and capricious at best, hostile at worst" at all visa levels, says Tamar Jacoby, president of advocacy group ImmigrationWorks USA. "If you're running an agricultural operation and these 30 workers are your whole season, it's a big obstacle."
The U.S. Citizenship & Immigration Service says no crackdown is afoot. "We haven't changed the way that we do our business over the course of the past few years," says agency spokesman Christopher Bentley. Yet government data show H-2B visas, issued to seasonal workers, were down 52 percent last year. H-2As, for agricultural workers, dropped 9 percent. And a June report by the agency's ombudsman said officers last year roughly doubled requests for additional evidence to support applications for H1-B visas (issued to professionals such as computer programmers), which immigration advocates say typically results in delays or denials. The ombudsman's report also noted an increase in complaints by employers regarding the process. The agency declined to comment on the report.
In the past two years the agency has issued at least a half-dozen directives regarding temporary work visas. In January, for instance, it sent a memo to its officers that effectively prohibits tech staffing firms, which provide programmers to corporations, from bringing in foreigners on H-1B visas. In June two trade groups and several IT staffing outfits filed a lawsuit alleging the new policy would destroy their business. Farmers, meanwhile, say recent rule changes on H-2A visas have made it harder to bring in legal workers. In the past three years regulations governing H-2As have changed three times, notes Craig Regelbrugge, government relations chief at the American Nursery & Landscape Assn. He says fees and other costs could double next year. "The new rules," Regelbrugge says, "are fundamentally anti-employer on almost every level."
The bottom line: The federal agencies that approve visas are making it harder for small companies to hire foreigners, immigration lawyers say.
View the original article here
Monday, 4 October 2010
Bailed-Out Banks Pass on Small Biz Loans
By Bob Ivry
Sept. 16 (Bloomberg) -- Chip Besse figured he could hire a dozen people once he got a $1.1 million small-business loan.
Wells Fargo & Co. turned him down.
U.S. taxpayers helped the San Francisco-based bank weather the 2008 financial crisis with a $25 billion loan and $9.5 billion of debt guarantees. By July 2009, when Besse wanted to buy and expand a Colorado snowmobile-rental business, Wells Fargo wasn’t sharing the wealth, he said.
Besse, 29, had little success with 16 other lenders in 2008 and 2009. His list included New York-based JPMorgan Chase & Co., which agreed to provide less than 70 percent of what he wanted, and Charlotte, North Carolina-based Bank of America Corp., which Besse said kept him hopeful for a month before rejecting his application.
“I was furious,” he said. “A lot of bankers are trying to justify their jobs and they waste everyone’s time.”
Besse, a Philadelphia native, was a partner in a London private equity firm with a credit score of 769 out of 850 and $185,000 in a checking account. His search for a loan shows how difficult it is for small companies, which the Small Business Administration says created 64 percent of net new jobs over the past 15 years, to get credit -- even from banks that accepted billions in taxpayer-funded bailouts.
Trading, Not Lending
The U.S. government helped Wells Fargo, JPMorgan Chase and Bank of America back to health with $189.3 billion in loans under the Troubled Asset Relief Program and debt guarantees through the Federal Deposit Insurance Corp. The rest of the country: not so much. That’s in part because of policies the Federal Reserve has instituted to help banks, said Peter Morici, an economist and professor at the Smith School of Business at the University of Maryland in College Park.
“We’ve created a system that encourages bankers to trade, not lend,” Morici said.
A record 41 percent of small business owners say they can’t get adequate financing, up from 22 percent two years ago, according to a July report by the National Small Business Association, a 150,000-member advocacy group founded in 1937 that has surveyed entrepreneurs since 1992. New small-business loans fell 33 percent last year from 2008 to $191.6 billion, the lowest total since 2000, according to the Federal Financial Institutions Examination Council.
Outstanding loans declined 16 percent as of June 30 compared with 2009, based on the council’s data. Tighter credit makes it tougher for entrepreneurs such as Besse to hire some of the 14.9 million Americans who are out of work.
No Data
Spokespeople for the three big banks that Besse approached said they didn’t track their small-business lending until last year, the middle of the longest economic downturn since the 1930s. It’s therefore impossible to gauge their recent volume against their performance before the credit contraction began.
JPMorgan Chase increased new small-business loans 36 percent to $4.5 billion in the first half of 2010 over the same period last year. Bank of America lent $8.2 billion, a 1 percent increase, the company said.
Wells Fargo lent $6.6 billion; it has no comparable number for 2009, according to Marc L. Bernstein, head of the bank’s Business Direct and Small Business Segment. Banks define small businesses as those with annual revenue of less than $20 million.
Little Demand
The three banks said they’re lending as much as they safely can in an environment with few creditworthy small businesses and soft demand.
“The last thing we want the banking system to be is excessively liberal in its lending standards,” said Bert Ely, a banking industry analyst in Alexandria, Virginia.
Entrepreneurs and their advocates counter that lending guidelines have become so strict that many business owners have given up trying to get credit.
“If the government had used the same lending criteria on the big banks that the big banks are using on us, the banks never would have gotten the TARP money,” said Carl Calhoun, who tapped $400,000 in home equity to finance his St. Petersburg, Florida-based mattress company, Commercial Bedding Co., after he couldn’t find a lender.
The credit crunch for small businesses has drawn the attention of President Barack Obama and Fed Chairman Ben S. Bernanke, who have both called for more lending.
With the U.S. unemployment rate stuck at more than 9.5 percent for the past year, the U.S. Senate today passed legislation that would provide $30 billion in loans to banks with less than $10 billion in assets. The bill, which now must go to the House for a final vote, includes incentives for the banks to extend credit to small businesses, along with tax breaks for eligible companies.
‘Still Struggling’
“At a time when small business owners are still struggling to make payroll and they’re still holding off hiring, we put together a plan that would give them some tax relief and make it easier for them to take out loans,” Obama said yesterday.
While they won’t disclose their investing strategies, JPMorgan Chase and Bank of America were among four banks that reported a “perfect quarter” in the first three months of this year. That means they made money trading every day. Wells Fargo wouldn’t reveal how its trading desk fared.
The Fed’s low-interest-rate policy makes it easy for banks to lend to the U.S. government rather than small businesses, said David Rosenberg, chief economist and strategist for Toronto-based Gluskin Sheff & Associates Inc., which manages $5.4 billion.
Safe Yields
Banks, which can borrow at the overnight rate of about 0.20 percent, can get safe yields of more than 2.5 percent buying 10- year Treasury bonds and other almost risk-free U.S. obligations, Rosenberg said.
Banks held a record $1.597 trillion of Treasury and government agency securities on Sept. 1, according to the Fed, 44 percent more than at the start of the recession in December 2007. The 10-year Treasury yield was 2.72 percent yesterday.
“The biggest risk in buying Treasuries is that interest rates will rise, and the Fed has repeatedly said short-term rates would remain close to zero as far as the eye can see,” Rosenberg said.
Lowering interest rates has been part of the Fed’s effort to facilitate small-business lending, said David W. Skidmore, a spokesman for the central bank in Washington.
Strengthening Banks
“Easier monetary policy encourages banks to lend to small businesses and other borrowers since the rates banks receive on alternative investments are lower,” Skidmore said. “And we have focused on strengthening the nation’s banks so that they can resume normal lending as quickly as possible.”
The Term Asset-Backed Securities Loan Facility, a Fed lending program established in November 2008, helped finance more than 850,000 small business loans, he said.
One option the central bank has to spur lending is cutting the 0.25 percent interest it pays banks on reserve accounts it holds for them, Bernanke said on Aug. 27. The central bank’s emergency lending and asset purchases since September 2008 have swelled those accounts to more than $1 trillion, according to Fed data, a more than 20-fold jump since the bankruptcy of Lehman Brothers Holdings Inc.
Senior loan officers at big banks reported loosening credit guidelines for small businesses this year for the first time since 2006, according to a July survey by the Fed. Still, small business owners complain that banks have reduced credit lines and increased interest charges.
‘Zero, Zippo’
“Bailing out Wall Street has done zero, zippo, nothing to help small business and create jobs,” said Dale R. Kluga, 50, president of Cobra Capital LLC, a finance company in Darien, Illinois, that funds about $40 million worth of equipment for small businesses.
Besse said he was eager to run his own outfit, so he left Clearbrook Capital Partners LLP when he found Grand Adventures LLC in Winter Park, Colorado. The company rents snowmobiles and arranges tours.
“It was a lifestyle decision,” he said. “I was thinking, how can I not work so much and have fun? Something where I can watch my kids grow up and be a part of the community.”
Since he had an account with Bank of America, he said he applied there first for a loan.
Jefferson George, a Bank of America spokesman -- like all representatives of banks Besse applied to -- declined to comment on Besse’s case specifically.
Bear Stearns
Besse approached Bank of America in June 2008, as financial institutions were tightening credit in the wake of the near- failure of Bear Stearns Cos. Since then, Bank of America’s lending to businesses with less than $20 million in annual revenue has fallen, according to regulatory filings. It had $15.9 billion in such loans outstanding at the end of June, down 12 percent from the same date last year and 20 percent from two years ago.
Though Bank of America said in a July 27 press release that it had loaned $45.4 billion in the first half of 2010 to small and mid-size businesses, about 80 percent of the loans went to companies with more than $20 million in sales.
“There’s very weak demand from the smallest businesses,” said Kathie Sowa, Bank of America’s small-business credit executive, who is based in Sacramento, California.
Demand only appears to have slackened because entrepreneurs are frustrated with lenders and have given up asking for money, said Galen Gondolfi, a senior loan counselor at Justine Petersen, a nonprofit microlender in St. Louis.
“I can tell you straight out: Small businesses are not getting the financing they need,” Gondolfi said. “We are experiencing unabated demand.”
Incomplete Statistics
Statistics on lending to small business aren’t always complete. Data collected by the Small Business Administration include only loans backed by the agency. The Federal Financial Institutions Examination Council, established in 1979 and consisting of the Fed, the FDIC and other bank regulators, tallies outstanding loans with original amounts of $1 million or less.
Loans backed by the SBA so far this year are down 14 percent compared with roughly the same period in 2007, according to the agency’s data. They increased 47 percent to $12.3 billion over last year, when the U.S. economy was contracting. SBA loans went to less than 1 percent of small businesses in 2009, according to data compiled by Bloomberg.
Besse took his quest for a loan to Wells Fargo in June 2008. After the bank’s underwriters said they wanted him to have experience in the snowmobile business, he went to work for the company he wanted to buy, he said.
In July 2009, Wells Fargo turned him down.
Went Snowmobiling
“I had a relationship with them,” Besse said. “They came out to Winter Park in January and went snowmobiling. They promised so many things and didn’t deliver anything.”
Wells Fargo’s Bernstein said the bank made $13 billion in new small-business loans last year, followed by $6.6 billion in the first half of 2010.
“We do everything we can to say yes,” Bernstein said in an interview. He declined to discuss Besse’s individual case.
Besse said a loan officer from JPMorgan Chase “moved faster than anyone else and operated the most honorably” and ended up offering a loan for $750,000 -- less than Besse needed.
The bank was looking to pare back risk, Besse said the loan officer told him.
Banks need cash cushions to insulate themselves against losses from the property bubble that they haven’t yet written off, said Christopher Whalen, co-founder of Torrance, California-based Institutional Risk Analytics.
Buybacks Possible
Such losses equal about one-third of the amount they’ve already written off as unrecoverable, Whalen said. For Bank of America, JPMorgan Chase and Wells Fargo, the total amount would be about $50 billion, he said, based on the banks’ regulatory filings.
Bank of America and JPMorgan Chase may be on the hook for as much as $78 billion in home loans they sold to buyers during the housing boom such as government-controlled Fannie Mae and Freddie Mac, according to an Aug. 17 report by Washington-based Compass Point Research & Trading LLC. Mortgage buyers can demand reimbursement for loans that violate underwriting guidelines or involve fraud.
Jerry Dubrowski, a spokesman for Bank of America, said credit quality is improving and he wouldn’t forecast charge- offs. Thomas Kelly, a JPMorgan Chase spokesman, said the bank is ready and willing and will continue to lend. Wells Fargo’s credit losses peaked in the third quarter of 2009 and the bank expects them to continue to decline, Chief Financial Officer Howard I. Atkins said Sept. 13.
Banks Under Pressure
Besse finally got an $850,000 loan from Collegiate Peaks Bank of Salida, Colorado. Collegiate Peaks, with four branches and $164 million in assets, borrowed $2 million in TARP funds, about .002 percent of the $95 billion in TARP money that went to Bank of America, JPMorgan Chase and Wells Fargo.
Banks with less than $10 billion in assets make 60 percent of the country’s small-business loans, according to the Independent Community Bankers of America. They’re under pressure to make fewer loans now, said Bob Hahn, chief executive officer of Community Valley Bank in El Centro, California, where the jobless rate is 30.3 percent, the highest in the U.S.
Small banks are failing at a rate of one every two days, according to FDIC data, and they’re facing greater regulatory scrutiny because of that, Hahn said.
“We’re being told to raise more capital or shrink assets,” said Hahn, whose bank has two branches and $60 million in assets. “What’s the primary asset of a community bank? Loans. That’s where the pressure is coming from.”
‘Financially Savvy’
Besse’s snowmobile business got credit in part because it had sufficient cash flow and the snowmobiles could be sold off in the event of missed payments, said Kim Palmer, the SBA lending manager at Collegiate Peaks.
“Chip is very financially savvy and has accomplished a great deal for someone his age and we saw this as a way to establish a relationship with someone like that,” Palmer said.
Besse hired 12 new employees by adding a guided back- country skiing business he called Powder Addiction.
Shawn Edmondson, 36, a husband and father of two boys, 9 and 7, was a carpenter in the area when work “slowed way down” because customers couldn’t get loans to renovate their homes, he said. He estimated that his 2008 income was $15,000.
Besse hired him last year as a ski guide. Edmondson said he earned about $200 in salary and tips every day on the slopes, surpassing his full-year 2008 pay in the six-month ski season.
“We don’t make a lot, but this is income that keeps us afloat,” Edmondson said. “We can pay our mortgage and stay on top of things.”
View the original article here
Sept. 16 (Bloomberg) -- Chip Besse figured he could hire a dozen people once he got a $1.1 million small-business loan.
Wells Fargo & Co. turned him down.
U.S. taxpayers helped the San Francisco-based bank weather the 2008 financial crisis with a $25 billion loan and $9.5 billion of debt guarantees. By July 2009, when Besse wanted to buy and expand a Colorado snowmobile-rental business, Wells Fargo wasn’t sharing the wealth, he said.
Besse, 29, had little success with 16 other lenders in 2008 and 2009. His list included New York-based JPMorgan Chase & Co., which agreed to provide less than 70 percent of what he wanted, and Charlotte, North Carolina-based Bank of America Corp., which Besse said kept him hopeful for a month before rejecting his application.
“I was furious,” he said. “A lot of bankers are trying to justify their jobs and they waste everyone’s time.”
Besse, a Philadelphia native, was a partner in a London private equity firm with a credit score of 769 out of 850 and $185,000 in a checking account. His search for a loan shows how difficult it is for small companies, which the Small Business Administration says created 64 percent of net new jobs over the past 15 years, to get credit -- even from banks that accepted billions in taxpayer-funded bailouts.
Trading, Not Lending
The U.S. government helped Wells Fargo, JPMorgan Chase and Bank of America back to health with $189.3 billion in loans under the Troubled Asset Relief Program and debt guarantees through the Federal Deposit Insurance Corp. The rest of the country: not so much. That’s in part because of policies the Federal Reserve has instituted to help banks, said Peter Morici, an economist and professor at the Smith School of Business at the University of Maryland in College Park.
“We’ve created a system that encourages bankers to trade, not lend,” Morici said.
A record 41 percent of small business owners say they can’t get adequate financing, up from 22 percent two years ago, according to a July report by the National Small Business Association, a 150,000-member advocacy group founded in 1937 that has surveyed entrepreneurs since 1992. New small-business loans fell 33 percent last year from 2008 to $191.6 billion, the lowest total since 2000, according to the Federal Financial Institutions Examination Council.
Outstanding loans declined 16 percent as of June 30 compared with 2009, based on the council’s data. Tighter credit makes it tougher for entrepreneurs such as Besse to hire some of the 14.9 million Americans who are out of work.
No Data
Spokespeople for the three big banks that Besse approached said they didn’t track their small-business lending until last year, the middle of the longest economic downturn since the 1930s. It’s therefore impossible to gauge their recent volume against their performance before the credit contraction began.
JPMorgan Chase increased new small-business loans 36 percent to $4.5 billion in the first half of 2010 over the same period last year. Bank of America lent $8.2 billion, a 1 percent increase, the company said.
Wells Fargo lent $6.6 billion; it has no comparable number for 2009, according to Marc L. Bernstein, head of the bank’s Business Direct and Small Business Segment. Banks define small businesses as those with annual revenue of less than $20 million.
Little Demand
The three banks said they’re lending as much as they safely can in an environment with few creditworthy small businesses and soft demand.
“The last thing we want the banking system to be is excessively liberal in its lending standards,” said Bert Ely, a banking industry analyst in Alexandria, Virginia.
Entrepreneurs and their advocates counter that lending guidelines have become so strict that many business owners have given up trying to get credit.
“If the government had used the same lending criteria on the big banks that the big banks are using on us, the banks never would have gotten the TARP money,” said Carl Calhoun, who tapped $400,000 in home equity to finance his St. Petersburg, Florida-based mattress company, Commercial Bedding Co., after he couldn’t find a lender.
The credit crunch for small businesses has drawn the attention of President Barack Obama and Fed Chairman Ben S. Bernanke, who have both called for more lending.
With the U.S. unemployment rate stuck at more than 9.5 percent for the past year, the U.S. Senate today passed legislation that would provide $30 billion in loans to banks with less than $10 billion in assets. The bill, which now must go to the House for a final vote, includes incentives for the banks to extend credit to small businesses, along with tax breaks for eligible companies.
‘Still Struggling’
“At a time when small business owners are still struggling to make payroll and they’re still holding off hiring, we put together a plan that would give them some tax relief and make it easier for them to take out loans,” Obama said yesterday.
While they won’t disclose their investing strategies, JPMorgan Chase and Bank of America were among four banks that reported a “perfect quarter” in the first three months of this year. That means they made money trading every day. Wells Fargo wouldn’t reveal how its trading desk fared.
The Fed’s low-interest-rate policy makes it easy for banks to lend to the U.S. government rather than small businesses, said David Rosenberg, chief economist and strategist for Toronto-based Gluskin Sheff & Associates Inc., which manages $5.4 billion.
Safe Yields
Banks, which can borrow at the overnight rate of about 0.20 percent, can get safe yields of more than 2.5 percent buying 10- year Treasury bonds and other almost risk-free U.S. obligations, Rosenberg said.
Banks held a record $1.597 trillion of Treasury and government agency securities on Sept. 1, according to the Fed, 44 percent more than at the start of the recession in December 2007. The 10-year Treasury yield was 2.72 percent yesterday.
“The biggest risk in buying Treasuries is that interest rates will rise, and the Fed has repeatedly said short-term rates would remain close to zero as far as the eye can see,” Rosenberg said.
Lowering interest rates has been part of the Fed’s effort to facilitate small-business lending, said David W. Skidmore, a spokesman for the central bank in Washington.
Strengthening Banks
“Easier monetary policy encourages banks to lend to small businesses and other borrowers since the rates banks receive on alternative investments are lower,” Skidmore said. “And we have focused on strengthening the nation’s banks so that they can resume normal lending as quickly as possible.”
The Term Asset-Backed Securities Loan Facility, a Fed lending program established in November 2008, helped finance more than 850,000 small business loans, he said.
One option the central bank has to spur lending is cutting the 0.25 percent interest it pays banks on reserve accounts it holds for them, Bernanke said on Aug. 27. The central bank’s emergency lending and asset purchases since September 2008 have swelled those accounts to more than $1 trillion, according to Fed data, a more than 20-fold jump since the bankruptcy of Lehman Brothers Holdings Inc.
Senior loan officers at big banks reported loosening credit guidelines for small businesses this year for the first time since 2006, according to a July survey by the Fed. Still, small business owners complain that banks have reduced credit lines and increased interest charges.
‘Zero, Zippo’
“Bailing out Wall Street has done zero, zippo, nothing to help small business and create jobs,” said Dale R. Kluga, 50, president of Cobra Capital LLC, a finance company in Darien, Illinois, that funds about $40 million worth of equipment for small businesses.
Besse said he was eager to run his own outfit, so he left Clearbrook Capital Partners LLP when he found Grand Adventures LLC in Winter Park, Colorado. The company rents snowmobiles and arranges tours.
“It was a lifestyle decision,” he said. “I was thinking, how can I not work so much and have fun? Something where I can watch my kids grow up and be a part of the community.”
Since he had an account with Bank of America, he said he applied there first for a loan.
Jefferson George, a Bank of America spokesman -- like all representatives of banks Besse applied to -- declined to comment on Besse’s case specifically.
Bear Stearns
Besse approached Bank of America in June 2008, as financial institutions were tightening credit in the wake of the near- failure of Bear Stearns Cos. Since then, Bank of America’s lending to businesses with less than $20 million in annual revenue has fallen, according to regulatory filings. It had $15.9 billion in such loans outstanding at the end of June, down 12 percent from the same date last year and 20 percent from two years ago.
Though Bank of America said in a July 27 press release that it had loaned $45.4 billion in the first half of 2010 to small and mid-size businesses, about 80 percent of the loans went to companies with more than $20 million in sales.
“There’s very weak demand from the smallest businesses,” said Kathie Sowa, Bank of America’s small-business credit executive, who is based in Sacramento, California.
Demand only appears to have slackened because entrepreneurs are frustrated with lenders and have given up asking for money, said Galen Gondolfi, a senior loan counselor at Justine Petersen, a nonprofit microlender in St. Louis.
“I can tell you straight out: Small businesses are not getting the financing they need,” Gondolfi said. “We are experiencing unabated demand.”
Incomplete Statistics
Statistics on lending to small business aren’t always complete. Data collected by the Small Business Administration include only loans backed by the agency. The Federal Financial Institutions Examination Council, established in 1979 and consisting of the Fed, the FDIC and other bank regulators, tallies outstanding loans with original amounts of $1 million or less.
Loans backed by the SBA so far this year are down 14 percent compared with roughly the same period in 2007, according to the agency’s data. They increased 47 percent to $12.3 billion over last year, when the U.S. economy was contracting. SBA loans went to less than 1 percent of small businesses in 2009, according to data compiled by Bloomberg.
Besse took his quest for a loan to Wells Fargo in June 2008. After the bank’s underwriters said they wanted him to have experience in the snowmobile business, he went to work for the company he wanted to buy, he said.
In July 2009, Wells Fargo turned him down.
Went Snowmobiling
“I had a relationship with them,” Besse said. “They came out to Winter Park in January and went snowmobiling. They promised so many things and didn’t deliver anything.”
Wells Fargo’s Bernstein said the bank made $13 billion in new small-business loans last year, followed by $6.6 billion in the first half of 2010.
“We do everything we can to say yes,” Bernstein said in an interview. He declined to discuss Besse’s individual case.
Besse said a loan officer from JPMorgan Chase “moved faster than anyone else and operated the most honorably” and ended up offering a loan for $750,000 -- less than Besse needed.
The bank was looking to pare back risk, Besse said the loan officer told him.
Banks need cash cushions to insulate themselves against losses from the property bubble that they haven’t yet written off, said Christopher Whalen, co-founder of Torrance, California-based Institutional Risk Analytics.
Buybacks Possible
Such losses equal about one-third of the amount they’ve already written off as unrecoverable, Whalen said. For Bank of America, JPMorgan Chase and Wells Fargo, the total amount would be about $50 billion, he said, based on the banks’ regulatory filings.
Bank of America and JPMorgan Chase may be on the hook for as much as $78 billion in home loans they sold to buyers during the housing boom such as government-controlled Fannie Mae and Freddie Mac, according to an Aug. 17 report by Washington-based Compass Point Research & Trading LLC. Mortgage buyers can demand reimbursement for loans that violate underwriting guidelines or involve fraud.
Jerry Dubrowski, a spokesman for Bank of America, said credit quality is improving and he wouldn’t forecast charge- offs. Thomas Kelly, a JPMorgan Chase spokesman, said the bank is ready and willing and will continue to lend. Wells Fargo’s credit losses peaked in the third quarter of 2009 and the bank expects them to continue to decline, Chief Financial Officer Howard I. Atkins said Sept. 13.
Banks Under Pressure
Besse finally got an $850,000 loan from Collegiate Peaks Bank of Salida, Colorado. Collegiate Peaks, with four branches and $164 million in assets, borrowed $2 million in TARP funds, about .002 percent of the $95 billion in TARP money that went to Bank of America, JPMorgan Chase and Wells Fargo.
Banks with less than $10 billion in assets make 60 percent of the country’s small-business loans, according to the Independent Community Bankers of America. They’re under pressure to make fewer loans now, said Bob Hahn, chief executive officer of Community Valley Bank in El Centro, California, where the jobless rate is 30.3 percent, the highest in the U.S.
Small banks are failing at a rate of one every two days, according to FDIC data, and they’re facing greater regulatory scrutiny because of that, Hahn said.
“We’re being told to raise more capital or shrink assets,” said Hahn, whose bank has two branches and $60 million in assets. “What’s the primary asset of a community bank? Loans. That’s where the pressure is coming from.”
‘Financially Savvy’
Besse’s snowmobile business got credit in part because it had sufficient cash flow and the snowmobiles could be sold off in the event of missed payments, said Kim Palmer, the SBA lending manager at Collegiate Peaks.
“Chip is very financially savvy and has accomplished a great deal for someone his age and we saw this as a way to establish a relationship with someone like that,” Palmer said.
Besse hired 12 new employees by adding a guided back- country skiing business he called Powder Addiction.
Shawn Edmondson, 36, a husband and father of two boys, 9 and 7, was a carpenter in the area when work “slowed way down” because customers couldn’t get loans to renovate their homes, he said. He estimated that his 2008 income was $15,000.
Besse hired him last year as a ski guide. Edmondson said he earned about $200 in salary and tips every day on the slopes, surpassing his full-year 2008 pay in the six-month ski season.
“We don’t make a lot, but this is income that keeps us afloat,” Edmondson said. “We can pay our mortgage and stay on top of things.”
View the original article here
Businesses bamboozled by jargon
Four in ten managers admit confusing jargon has duped them into buying needless technical solutions from IT salesmen.
According to a study of 500 business owners by Opal, the b2b division of broadband provider TalkTalk Group, more than half (55 per cent) say baffling technical terms cause them to ‘occasionally’ make decisions about telecommunications which they don’t fully understand, with 13 per cent reporting this happened ‘regularly’.
The vast majority (78 per cent) of owner managers say they’re often put off scoping out new projects or even speaking to suppliers due to fear of confusing jargon during the sell.
Furthermore, 18 per cent of managers believe that the use of jargon shows a lack of understanding of their business needs.
Clive Davenport, trade and industry committee chair at the Federation of Small Businesses, says: ‘Unnecessary, complicated and technical language from salesmen needs to be stamped out to help small companies concentrate on what’s important, growing their business.’
SMBs’ Social Media Expectations–and Realities
eMarketer brought my attention to the Small Business Success Index (SBSI) that was actually released a couple of months ago. The research was compiled by the University of Maryland/Network Solutions and showed some promising signs that small business owners are getting into the social media thick of things. The study interviewed 500 small business owners by telephone to find out what social networks they were using, why they started using them, and whether or not their expectations were being met.
According to the SBSI, social media adoption had doubled from 12 to 24 percent over the last year (that number may be up to 36 percent now). Of the businesses using social media, 82 percent were focusing their efforts on Facebook, with LinkedIn coming in second place. The most common social activities listed were maintaining a company page and posting status updates or links to interesting content. About half said they also monitor chatter about their brand on social networks.
Something I found interesting was that half of small business owners commented that social media takes up more time than they had originally planned for, but most also feel it’s time well spent and that it’s paid off for the business financially. To me ,that signaled there may have been a lack of understanding about what really goes into effectively using these tools.
eMarketer noted that as small businesses have gained experience with social media, some have realized their expectations for the channel did not line up with the reality of the social Web–which, again, points to the same lack of understanding. It’s interesting to see how successful SMB owners were at accomplishing specific goals, compared to what they were expecting:
Overall, even though an initial lack of understanding caused the businesses surveyed to have to adjust their expectations, the SBSI painted a very positive picture of SMB social media use.
eConsultancy released its own Social Media and Online PR report that surveyed 800 business owners. Though the survey is skewed toward the U.K. (just 8 percent of respondents were from North America), there are still some interesting findings for small business owners.
For example, according to the 82-page report, 95 percent of companies have added social media to their mix; however, 45 percent have either “experimented” or “done nothing” at all with social media. So they added it, but then ignored it! Another 45 percent say they haven’t taken any steps to implement internal policies or guidelines for the use of social media. Again, it’s just sitting there.
Of those companies that do actually use social media:
83 percent are using Twitter80 percent are using Facebook58 percent are using YouTube51 percent are using LinkedInI was pretty impressed to see YouTube pulling in such high numbers, putting it over LinkedIn. My guess is that many of the companies surveyed have larger budgets and are therefore more comfortable experimenting with video than the average small business owner.
The folks at Marketing Pilgrim also commented on the study and showed that, with the exception of corporate blogging, there had been a decline in every social media tactic from creation of podcasts to video to the use of social bookmarketing sites. Part of me can’t help but wonder if this is at all tied to the fact that these companies admitted they had barely experimented with any of the tactics they were trying. It’s logical that if you haven’t created a plan for using social media, you won’t see much benefit from it and will decide to drop it altogether. It appears that’s what’s happening here.
Side by side, I think both studies give a powerful look at how business owners are navigating their way through social media. If there’s anything for small business owners to take from this, it’s that you have to be familiar with the tools you’re using and create a plan for how you will add them to your business. Without that knowledge, you’re setting yourself up with false expectations. Social media is really no different from any of your other marketing efforts. You have to invest in its success.
Email marketing seen as spam
Consumers see no difference between legitimate marketing emails and spam, says research.
According to a survey by market research company TNS of 2,013 adults, more than half (52 per cent) do not differentiate between legitimate marketing and unsolicited bulk email.
Some 59 per cent of consumers demand tougher legislation on email marketing to help bring the situation under control.
CEO of technology consultant Kognitio, Roger Llewellyn, says: ‘If marketing becomes increasingly conflated with spam, then consumers will become even more alienated and companies will have to deal with that dissatisfaction.’
It is possible for companies to use email responsibly, adds Llewellyn.
‘Reputable companies should keep their email marketing focused, concise and transparent. If they don't do this, and if their customers increasingly lump all email marketing in the junk box with spam, then the companies have nobody to blame but themselves.’
America's Best Young Entrepreneurs 2010
By John Tozzi
It's not an easy time for young entrepreneurs. Most people in their teens or early 20s trying to start businesses today were not yet out of college when the Great Recession began in December 2007. Unlike their dot-com-era predecessors, today's startups aren't sloshing in venture capital, and business credit is tight. People under age 35 started businesses at a lower rate in 2009 than in the year before, even as the rate of entrepreneurship in the broader population is increasing, according to data from the Kauffman Foundation.
The finalists in Businessweek.com's sixth annual search for America's best young entrepreneurs reflect the times: Most of their companies are lean and focused on getting profitable before expanding. Take LiveProud, a group of clothing brands for sailors, hikers, and yoga enthusiasts that two Babson College seniors started in 2007. Founders Phil Tepfer and Charles Bogoian, both 24, keep costs down by sewing their apparel at contract manufacturers in the U.S. and Canada as orders come in. "We work on very low inventory numbers," Tepfer says. LiveProud, which gets its fabric from recycled landfill materials like plastic bottles and corn husks, became profitable within a year, and expects revenue of $375,000 this year, he says.
Others have built recession-friendly business models. Onetime Georgetown roommates Ben McKean and Dan Leahy got their idea for a service that would help high-end restaurants fill empty tables in 2009. McKean, then an analyst at Merrill Lynch, was covering the initial public offering for restaurant reservation service OpenTable (OPEN). By last September, he and Leahy had quit their Wall Street jobs to start VillageVines. Subscribers to their e-mail newsletter can pay $10 for discounts of 10 percent to 30 percent at restaurants in New York and five other cities. The service launched in May and now has more than 500,000 subscribers, McKean says. VillageVines raised $500,000 in angel investment and its New York operation became cash-flow positive in three months, and it's now investing in other cities such as San Francisco, Chicago, and Boston, he says.
LiveProud and VillageVines are among the hundreds of young companies nominated by readers this summer and vetted by Businessweek.com reporters. Some are multimillion-dollar operations: 23-year-old Ray Land built a fleet of 40 charter buses in northern Florida that brought in $3 million last year. Others, like Bethlehem (Pa.)-based LifeServe Innovations, have no revenue yet. LifeServe's prototype, developed from the founders' university research and now in preclinical testing, is a medical device meant to help minimally trained care providers open patients' airways in emergency situations.
Each of the 25 companies in our roundup share a few qualities: Their founders were no older than 25 at the nomination cut-off date, and they appeared to hold promise based on business model, founders' experience, outside capital, and revenue. Now it's your turn to weigh in. Flip through this slide show of our 25 finalists and vote for your favorite by Oct. 21. We'll announce readers' top picks on Oct. 28.
Also in this year's report: We profile an effort at the University of Utah to nurture student startups; Smart Answers columnist Karen E. Klein evaluates funding options for aspiring business owners; and a 25-year-old New Jersey native who recently launched a Mandarin-language teaching business in Beijing describes her journey. You can find each of these features in the Related Items box at the upper right side of this overview.
Small Business News: Management 101
Is management ability something you’re born with or can it be learned through careful study? Just as there can be many kinds of small business owners and many kinds of managers, so there can be many approaches to the art of managing a small business. Your approach may not be better or worse than a colleague’s or competitor’s, but it must suit your business and personality. Perhaps the most important aspect of learning small business management is to immerse yourself in the issues that concern small business. We’ve assembled a small collection we hope will help. Enjoy!
Tips for managing complex projects with examples. Here, from business advisor Donald Metznik, are five tips to get you started in confronting a complex and intimidating project, as well as some great examples to get you through to the other side. Thanks, Donald! Business Owner Blog
Managing your way into year two of a startup. Small business management can in some ways be seen as an adventure in survival. Here are five really cool ways to make sure your small startup lasts beyond its first year of life. (There’s also a really cool video by Simon Sinek so enjoy.) Insert Coffee to Startup
Questions answered for small business. While it’s unlikely to change the minds of skeptical small business owners about the overall impact of the Small Business Jobs Act of 2010, Scott Roen, Vice President of American Express Open Forum sits in for this question and answer session with SBA Deputy Administrator Marie Johns. Listen for your opportunity to submit more small business questions via Open Forum in the future. White House
What kind of financial team does your small business team need? It’s important when considering your small business management whether it might be prudent to bring in experts in any part of your operation. And this could include the area of financial management. So how do you know when you need an accountant or CFO? And how do you get the right person for the job? Business.gov
Some thoughts on the perfect storm. Needing to fire an employee, especially due to downsizing, is a reality every business may need to face. But how you handle employees that must be let go is critically important, especially in the age of social media. As blogger Ivan Widjaya reminds us, the same tools that allow leveraging of markets never before reachable make us vulnerable to those dissatisfied with our business or who feel mistreated. Noobpreneur.com
Why money isn’t always the answer. This look at “lean performance reviews” suggests that there may be all kinds of ways to reward top performers. And small to medium sized businesses may be in an even better position to exploit this fact than larger companies. Read the whole post with links to more data above. Winning Workplaces
The messages you send as a small business owner may go beyond the ordinary. We worry plenty about many modes of communication concerning our small businesses these days. From social media to the way we manage employees to the way we design products, market them and deal with customer service, it all can impact our brand. But when is the last time you thought about the message your tie is sending? Bloggertone
Lessons on how NOT to multitask. Yes, it’s all the rage these days. The idea of multitasking, of doing or concentrating on more than one critical function or task at a time. It’s considered a really necessary skill for small business owners who must wear many hats. But, according to Zack Shapiro, it’s important not to try to wear more than one of those hats at a time. Epic Launch
How to handle the time hogging client. Whether it’s your fault or not, customers or clients dissatisfied with the service your company offers can take up a great deal of your time complaining about the job you do for them while at the same time demanding more and more and more of your time to satisfy their expectations. If you let them, these customers can steal valuable time that will negatively impact your business while still never really satisfying their expectations. Above are some thoughts about correcting the situation. My Project Tracker
The digital equivalent of a string on your finger. You may recall the stories of busy people who tie strings to their fingers in order to avoid forgetting something critical. But what if you had a digital equivalent that helped avoid the social awkwardness of shaking someone’s hand on a particularly busy day. This product review of Remember the Milk, the digital equivalent of a to-do list but better may keep you from ever forgetting or procrastinating on an important project again. Pixld
Obama Signs Bill Giving Tax Cuts, Loan Help to Small Businesses
Sept. 27 (Bloomberg) -- President Barack Obama signed legislation that will cut taxes and provide credit help for small businesses, calling it an essential step for job growth in a slow economy.
Obama signed the Small Business Jobs Act during a ceremony in the East Room of the White House. It is the fourth jobs measure to clear Congress this year and is likely the last before the Nov. 2 midterm congressional elections.The bill, which won final congressional approval last week, provides billions of dollars worth of tax cuts over the next 12 months, with the bulk coming through “bonus depreciation,” which allows companies to more quickly write off the cost of purchases. It also revives stimulus provisions cutting fees and increasing limits on loan guarantees offered by the Small Business Administration.
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