In State of the Union, Obama Calls for Increased Credit, Exports

The nation's small businesses had much to hope for following President Barack Obama's inaugural State of the Union address.

In a 68-minute speech focused primarily on job creation, Obama called for an increase in lending to the nation's smaller firms, as well as an increase in exports and business tax incentives to spur the nation's stagnant employment numbers.

"When you talk to small business find out that even though banks on Wall Street are lending again, they're mostly lending to bigger companies," said the President. "Financing remains difficult for small business owners across the country, even those that are making a profit. So tonight, I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat."

Obama also proposed a tax credit for small businesses that hire new staff or raise wages. "While we're at it, let's also eliminate all capital gains taxes on small business investment, and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment," he added.

Later in the speech, the President turned to exports, which have remained one of the only reliable bright spots throughout the recession. "We will double our exports over the next five years, an increase that will support two million jobs in America," said Obama. "To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security." A doubling of exports had previously been listed by the U.S. Chamber of Commerce as one of the association's keys to job recovery in 2010.

To reach the ambitious new trade goal, Obama suggested continued work on global agreements as well as stringent enforcement of already existing ones. "If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores," he said. "But realizing those benefits also means enforcing those agreements so our trading partners play by the rules. And that's why we'll continue to shape a Doha trade agreement that opens global markets."

"We will strengthen our trade relations in Asia and with key partners like South Korea and Panama and Colombia," Obama added, stopping short of endorsing the full-scale approval of the nation's three pending Free Trade Agreements (FTAs) with South Korea, Panama and Colombia. Business leaders and the U.S. Chamber have repeatedly called on the administration and Congress to approve all pending FTAs in addition to implementing new ones.

Not all things international were endorsed by the President in his address, and most notably when it came to labor, Obama suggested that outsourcing and offshoring companies may face a less friendly tax code in the future should they continue to create jobs in other countries at the expense of jobs created here. "To encourage businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America," said Obama.

Jacob Barron, NACM staff writer

Antitrust Issues

Easily overlooked and frequently misunderstood, antitrust law can bedevil credit professionals and their companies in a number of different ways.

Although primarily thought of as regulations against anti-competitive behavior or monopolies, antitrust law also includes provisions that govern the exchange of information and collaboration between companies in the same industry that may deal with the same customer base. And sometimes, all it takes to cement a violation of the law is a simple, innocently-sent internal company communication.

"If you think about the Microsoft lawsuit that went on for years that hit every newspaper, one of the things that absolutely was the nail in the coffin on the Microsoft antitrust litigation was an internal email that was found in their systems that Microsoft never intended anyone to see," said Wanda Borges, Esq. "The system had been purged but the email was uncovered and said ‘we are going to launch this product and bury the competition;' clearly an intent on behalf of Microsoft to destroy their competition."

Borges recently led an NACM-sponsored teleconference, "Antitrust Issues," illuminating the myriad ways companies can run afoul of the law and potentially expose themselves to potentially harmful civil and, even in some cases, criminal penalties.

For many credit professionals, the greatest risk for antitrust violations comes from exchanging information about customers between colleagues at other companies. Whether it's an informal chat on the phone or an organized credit group meeting, certain types of information cannot be shared and credit professionals need to be aware of this to avoid possible prosecution.

"You have to be careful that the conversation does not go beyond actual, factual and complete," said Borges. "Somebody might be tempted to say ‘you know, the customer used to be at a $30 million
credit limit; we just brought them down to $10 million.' This is factual."

"They might continue, saying ‘and unless they pay us on time, we're going to cut them off altogether,'" she added. "That's something that could happen in the future. Therefore it is an improper statement to make."

Problems tend to creep in when credit professionals exit the protective confines of an industry credit group meeting, like the ones hosted by NACM. "You might get a phone call at that point from one of your competitors. ‘You were talking at the meeting about customer X and you say you brought them down, but you won't say more than that,'" said Borges. "‘But now that it's just you and me on the phone, what are you going to do in the future?' You never ever talk about future activity."

As a rule, Borges suggested that credit professionals stay away from conversations about credit terms in general, especially in an informal setting. "You don't ever want to have a discussion about credit terms," she said. "It's very interesting to note that from time to time one of your so-called friends will rat you out. I have gotten phone calls telling me about the tennis game or the golf course, or the dinners, and all of the sudden in the middle of dessert, ‘oh by the way, what are you doing about this customer?'"

"These kinds of impromptu conversations can get you caught," she added.
For a replay of this teleconference, contact Tracey Flaesch at (410)740-5560 or by email at To learn more about NACM's teleconference series, click here.

Jacob Barron, NACM staff writer

Conducting Customer Visits

While their inclusion in company budgets may be an infrequent occurrence in a recession, Susan Delloiacono, CCE, NACM's resident expert on customer visits, recently led an NACM-sponsored teleconference that showed attendees the value of customer visits, and how companies and credit professionals can, and should, make the most of them.

Before leaving the office for a customer's headquarters, credit professionals should ask themselves one simple, albeit important, question: "Why are you visiting?" asked Delloiacono, noting that each visit should be conducted with a concrete goal in mind, and that this goal will change depending on the customer's situation. "The ‘stay-well' visit is our sweet spot in credit," she added, referring to a customer visit conducted when the customer is having no real payment problems. "But to get our sales people and management to get in while things are going well is a challenge. For most of us it's a ‘get-well' visit or we're putting out a fire and it requires a face-to-face communication."

Conducting visits only when there's an issue, however, can make for sometimes tense confrontations between creditors and their customers. "Your tensions are getting fired up, and it's a ‘we're right they're wrong' kind of thing," said Delloiacono. "If you have that ‘stay-well' visit under your belt before the problem, you can fix it without having to visit." Thinking ahead and visiting when nothing in particular is problematic can often make future crises much more manageable.

For Delloiacono, an effective customer visit doesn't merely end when credit professionals leave the customer's campus. Even on the ride back home, care should be taken when it comes to immediately discussing what happened during the visit. "Don't talk about it in a restaurant and don't talk about it on an airplane, especially if there's something sensitive," she said. "Talking about it in the car is the best place because you know you're alone." Additionally, after returning to the office, what was agreed on during the customer visit should be placed as a top priority on the company's to-do list if possible. "The worst thing you can do is go out, visit a customer, have a to-do list and do nothing with it," said Delloiacono. "Even if you don't own the action, you are now the cheerleader to get all of those actions done."

In the end, customer visits, when conducted properly, can result in real bottom-line benefits for companies and their credit departments, as well as for the customer too.

For a replay of this teleconference, contact Tracey Flaesch at (410)740-5560 or at More on NACM's teleconference series can be found by clicking here.

Jacob Barron, NACM staff writer

IRS Lien Use Doing More Harm Than Good

In her annual report to Congress, National Taxpayer Advocate Nina Olson recently noted that liens used by the Internal Revenue Service (IRS) as a tax enforcement strategy were ineffective and potentially did more harm than good to the taxpayer and to the agency itself.

According to Olson, lien filings by the IRS experienced a meteoric 475% increase between 1999 and 2009, jumping from 168,000 in FY 1999 to nearly 966,000 a decade later. On the other hand, over the same period, inflation-adjusted collection revenue fell by 7.4%.

Olson also noted that the automated system the IRS uses to file liens doesn't account for the taxpayer's ability to actually pay down the debt, meaning the liens only have the effect of making the taxpayer less eligible for credit and damaging their already wounded financial viability. By failing to consider the other debts owed by the taxpayer, she noted, the IRS has involuntarily lead many into long-term noncompliance.

"Any taxpayer with these debts will tell you that these creditors don't go away," Olson said. "Taxpayers are placed in the intolerable position of agreeing to pay the IRS more than they can actually afford, given their other debts, and then defaulting on the IRS payment arrangements when they channel payments to unsecured creditors in order to get some peace. Thus, the IRS itself fosters noncompliance by its failure to take a holistic approach to the taxpayer’s debt situation."

Criticism of the agency came quickly from Capitol Hill. "The point of IRS restructuring and the creation of the taxpayer advocate's office itself was to restore taxpayers' rights after the IRS had engaged in heavy-handed enforcement tactics," said Senator Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, whose jurisdiction includes tax policy. "I worry that the IRS is reverting to some old habits to taxpayers' detriment."

Grassley also criticized the gap between the IRS' treatment of larger firms and their treatment of smaller businesses. "There seems to be more interest at the highest levels of Treasury and the IRS in helping big banks than working with small business owners and average taxpayers," he said. "The placement of liens on the little guys shouldn't be automatic and computer-generated while the big banks get the benefit of agency discretion and concern in the executive offices. One, it's unfair, and two, it's bad for the economy. Small businesses create 70% of all net new jobs."

Jacob Barron, NACM staff writer