The Basel III standards for international banking are set to take effect within months. And despite numerous attempts to clarify sections of the accord, there is still so much unknown about the impact the changes will actually have, said panelists at the Finance Credit & International Business Association (FCIB) Annual International Credit & Risk Management Summit in Prague.

Elisabeth Sutter-Becska, vice president, head of global export finance at Raiffeisen Bank International in Austria, says rising importance of the trade credit role and for funding costs, among other increased costs in general, should be expected. As such, trade creditors and their businesses should be preparing in a number of ways in the near-term: Reassess working capital management, consolidate treasurer operations, optimize payment streams, improve receivables management, shorten payment tenors when possible and diversify resources. Still, it is hard to plan actions because of how difficult it is to predict what will actually occur.

“Nobody can say what is going to come from the three regulation, and there are not studies that have determined what would be the affect on the real economy,” she told FCIB delegates.

Meanwhile, panelist Neil Ross, trade credit insurance profit centre manager EMEA, AIG Euopre Limited in the United Kingdom, also voiced concerns about potential confusion about what will actually happen.

“One of the things that strikes me, you have the Basel III rules, but it's up to each country to interpret the rules; each country has slightly different interpretation,” said Ross. “It makes it much more complicated.”

Ross added that credit insurance will likely play a a bigger role as banks are “under pressure to keep head counts down...Doing analysis on thousand of buyers is frankly not where the banks want to be right now.”

-Brian Shappell, CBA, CICP, NACM staff writer

The Finance, Credit and International Business Association (FCIB) will hold its first Spring Conference at the National Association of Credit Management’s (NACM’s) 117th Credit Congress & Exposition on May 18-21, 2013 at the Rio Hotel in Las Vegas. NACM's Credit Congress has always provided a venue for both domestic and international credit professionals who extend business-to-business credit, but with the inclusion of a specialized Spring Conference comes a focus on the growing opportunities in global trade.

“The purpose of the FCIB Spring Conference is to expand the knowledge base for U.S. companies that are starting to export, and to further educate and provide tools for the advanced international credit management executive,” said Marta Chacon, CICP, FCIB Director - The Americas. “The specially-designed sessions will address the pressing issues facing international trade professionals around the world, and provide the solutions that work in various global markets.”

The FCIB sessions, integrated into the Credit Congress schedule of events, focus on expanding the efficiencies in international credit management. Topics include how to create profit, reduce risks, identify the potential pitfalls in exporting, discuss ethical compliance in order to work effectively on a global level and cover the intricacies of doing business in the United States' largest trading partners, Canada and Mexico.

The Spring Conference comes on the heels of other noteworthy FCIB endeavors. Earlier this month, FCIB entered into a strategic partnership with the U.S. Commercial Service to promote exporting under President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. The partnership aims to make it easier for all U.S. companies to take advantage of exporting opportunities offered around the globe, with FCIB acting as a portal through which exporters can find the tools and resources they need. Under the partnership, FCIB has already played a role in the development of the third edition of the International Trade Agency’s Trade Finance Guide, and the first Spanish-language version of the guide.

“With an estimated 95% of the world’s buying power existing outside the United States, U.S. businesses of all sizes should consider the benefits of selling their products and services abroad,” said Chacon. “By incorporating a spring conference into the yearly Credit Congress, FCIB furthers its role in helping companies expand into the international market. With FCIB's sessions open to all registrants, those looking to begin exporting, as well as already-advanced international trade professionals, receive the benefits of tailored education, in addition to numerous networking opportunities and an expo of product and service providers that a large venue offers.”

FCIB and NACM welcome walk-in registrants and the press.

- FCIB

In a meeting that followed the Finance, Credit and International Business Association’s (FCIB’s) Annual International Credit and Risk Management Summit, members of the European Commission promoted the purposes and potential for success of the European Late Payment Directive. Those many aren't convinced that setting harder limits on the amount of days government entities and debtor companies will actually cause positive change and trump local laws, especially in places where slow paying is an engrained culture, some see it as an important step.

“It’s the best thing to happen in credit management in a decade because now we have European [Union] support. That gives us higher profile as credit managers,” said Mark Harrison, chief executive of the Czech Institute of Credit Management during a panel during the FCIB event.

In an FCIB interview onTuesday, Antti Peltomaki, deputy director-general of the European Commission’s Enterprise and Industry Directorate-General, said he understands the those being skeptical over the speed of cultural change, but sees the Directive as a critical step in the right directions for credit-granting businesses. “It is good and important to have the legal framework...It is up to you whether you want to do something," said Peltomaki.

-Brian Shappell, CBA, CICP, NACM staff writer  
The extended version of this story, including more from Peltomaki, published in this week's edition of eNews, is available by clicking here.

At this week’s Finance, Credit and International Business Association’s (FCIB’s) Annual International Credit and Risk Management Summit in Prague, two FCIB members—Angela Bradbury, ICCE and Daniel Van Damme—were presented with its distinguished Service, Development and Growth (SDG) Award.

Bradbury, group credit and payable manager with Innospec, Inc. in the United Kingdom, and Van Damme, group working capital manager with Tessenderlo Chemie SA in Belgium, joined the short list of SDG award winners. Van Damme serves as the chairperson of the Chemicals Industry Group and Bradbury serves on FCIB’s European Advisory Council and is a frequent conference speaker, taking part in the Prague summit and scheduled to present at next week’s Credit Congress in Las Vegas.

“They have tirelessly worked to educate their staff, to really contribute and give back into the international credit community,” said Noelin Hawkins, FCIB director, Europe, The Middle East & Asia. “I can’t recall anyone working harder.”

The award is designed recognize the valuable contributions volunteers are making to further grow and develop FCIB’s member services and to encourage more people to serve. The first winner of the award, Mannes Westhuis, LL.M., CICP, Bierens Debt Recovery Lawyers, also eloquently described it as something that represents a win-win situation for today’s international credit-related professional: getting in touch with customers and information on leads, while “being socially and professionally responsible.”

- Brian Shappell, CBA, CICIP, NACM staff writer

All eyes have been on Spain when it comes to nervous businesses owners, credit professionals and other market-watchers wondering when the next European sovereign insolvency is going to occur. And while it would be overly optimistic to assume that danger wasn't imminent in Spain, a top four economy, by size, on the continent, another nation may beat it to default: Slovenia. At least that was the sentiment at FCIB's Annual International Credit & Risk Management Summit in Prague.

“Slovenia is far riskier than Italy or Spain,” said FCIB panelist Silvina Aldeco-Martinez, managing director of Risk Analytic Products, Standard & Poor's. She noted that, unlike Spain, it's not overall risk throughout many sectors; it's just massive problems in its banking sector.

Freddy Van den Spiegel, of BNP Paribas Fortis, agreed that Slovenia may slide into insolvency and that Spain faces many issues. Because of the nature of the problems and size/importance of its economy to the EU, Spain's filing, should it occur, would be a significantly bigger event. He said the prospects for Spain continue to generate pessimism because its high unemployment (25% among the young) shows little signs of improving because the nation doesn't have solid products and brands to make them competitive and, thus, pull themselves out of the rut. The big problem therein is that France, once hoped to help the recovery financially as much as Germany, holds so much Spanish debt.

“If it happens, we'll see what happened in Cyprus: panic,” the Belgian-based economist said. “If Spain gets into trouble, then France comes onto the radar”

All that said, Van den Spiegel still believes the European Union and the common currency will survive, but in a setting of more centralized EU power both in lawmaking and on the part of the European Central Bank.

-Brian Shappell, CBA, CICP, NACM staff writer

Off the strength of continued growth as a hub for service centers and more generalized outsourcing, nations in eastern Europe, Soviet Bloc countries until the late 1980s, are emerging as slightly bigger players in the business and credit world. However, the corporate information emanating from there often is not entirely trustworthy, said panelists at FCIB's Annual International Credit & Risk Management Summit in Prague.

FCIB panelist Elisabeth Sutter-Becska, of Raiffeisen Bank International in Austria, noted that problems with performing loans levels in Ukraine and Russia are increasing again after a few years of improvement. Fellow FCIB panelist Fabrice Morel, of Berne Union, noted there was a major spike in 2008 as well, one that showed the long-term stability of credit insurance companies in Europe in some ways, but that the four following years marked a time when issues had been mitigated in significant fashion.

The potential for another spike stems from the quality of information on the businesses in several eastern European nations. Kateryna Barabash, managing director and owner of IBcontacts, a Ukraine-based firm dealing in credit, legal and news services, said the information can be hard to analyze...if a credit manager can even get it at all.

“You have to realize there is a lot of information that is incorrect or out of date,” Barabash said, adding that a high level of nepotism plays into what is released by companies. “You have to verify this information with a buyer and your partner...don't rely just on existing database information.” Beyond that, she noted that perhaps the even bigger problem is getting data like financials since estimates of the rate of refusal for such requests tracks between “60% and 70%.”

In short, her sentiment was, if the company is not being transparent, they are very likely hiding something important in the grand scheme of creditworthiness.

-Brian Shappell, CBA, CICP, NACM staff writer

The Finance, Credit and International Business Association (FCIB) is already an important global source of exporting education and professional networking. Now, however, the association is expanding to become a portal through which exporters of all sizes can find the tools and resources they need to effectively grow their business through international trade.

Most recently, at the Port of Los Angeles' Trade Connect seminar held on May 8, FCIB, in partnership with the U.S. Department of Commerce's International Trade Administration (ITA), unveiled the first-ever Spanish-language edition of the ITA's Trade Finance Guide. FCIB member Diego Jiménez, ICCE, credit analyst at Accuride International, Inc., was instrumental in the review of the translated guide, as well as to the program of this week's Trade Connect seminar. Another FCIB member, Timothy Bastian, ICCE, corporate credit manager for Western Oilfields Supply Company, also presented a session at the event.

The announcement came on the heels of FCIB and ITA signing a new memorandum of understanding (MOU) in order to increase awareness in the U.S. business community, particularly among small and medium-sized businesses, of the opportunities offered by exporting, as well as the tools and resources available to companies through the two organizations. The MOU builds on previous collaborations between FCIB and ITA, beginning with the drafting of the original Trade Finance Guide, its subsequent updates and now its first Spanish-language edition.

“By working together, FCIB and ITA are making it easier for all U.S. companies to take advantage of the exporting opportunities offered around the globe," said FCIB's Director–Americas Marta Chacon, CICP. "The Trade Finance Guide, which is now in its third edition and is now available to Spanish-speaking business owners, is only the first step in what will be a long line of collaborations geared toward unlocking world markets for businesses of all sizes."

Through the MOU and updated Trade Finance Guide, FCIB is becoming more deeply ingrained in the policy goals outlined in President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. FCIB's partnership with ITA puts them in good company with the U.S. Commercial Service's other strategic partners and will enable the association to better support the goals of the NEI by educating U.S. businesses about the benefits of exporting and directing them to the wealth of public and private resources available to assist them.

- FCIB
 

The National Association of Credit Management’s CMI for April 2013 for April 2013, available by Tuesday afternoon, is expected to report less than optimistic conditions, including more companies feeling the stress of the slow economy and failing to meet payment terms.
 
The release will illustrate that the Credit Managers’ Index (CMI) for April fell to levels not seen in over a year. Though still expected to be in expansion territory (above a level of 50), things are certainly heading in the wrong direction. The real damage to the CMI is expected to come from the unfavorable factors categories. To wit, the most dramatic declines are to be found in dollar amount beyond terms and amount of customer deductions.

“The collapse in dollar amount beyond terms signals that many companies have entered the danger zone,” said NACM Economist Chris Kuehl, PhD. “The sense is that many companies are now on the brink of real trouble, and if the economy continues to stall, there will be some overt business collapse in the next quarter or two.”

There are expected to be some positive notes, including a slight gain and stability, respectively, in the sales and new credit applications categories comprising the favorable factors index.

-NACM

The complete CMI report for April 2013, available by Tuesday afternoon, contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

A new study by the United Kingdom-based branch of Dun & Bradstreet suggests updates the European Union Late Payments Directive already are having an impact on payment behavior, at least in Britain.

D&B’s statistics noted that British businesses borrowing on terms paid their bills on aggregate two days faster in 2012 than in the previous year. At an average of 17-days late, British businesses’ tardiness on terms reached a record level in 2011, said D&B. Directive updates in the EU, last done in summer 2011, represent an important legal development designed to ensure the payment of business-to-business invoices is conducted within 60 days, and public authority-to-business invoices within 30 days. In theory, it is a win for suppliers. But there some potentially conflicting fallout exists, as D&B noted:

"This legislation makes it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days for business and 30 days for public authorities.  Whilst it will help protect some businesses [suppliers], the updated Directive presents new risks for companies [customers] struggling to manage their finances and pay on time, due to the potential interest liability risk."

In addition, to assume the directive will drastically improve payment habits within the debt-struggling EU may be a bit of a leap of faith. Though talking about the potential for EU-wide changes to bankruptcy/insolvency laws not the Late Payment Directive, a point made by Thomas Voller, an attorney with Germany-based Voller Rechtsanwälte and member of EuroCollectNet, could be considered. This is the case in part because, as Voller put it, there really isn’t all that much unity, from a continuity sense and legal perspective, in the euro zone.

“There is a tendency in the European Law to try to unify the rules and to find a common applicable law for all European states in some areas,” he told NACM for the international bankruptcy-focused article “Moving Targets” in the May edition of Business Credit (available next week). “Obviously, this is extremely difficult, and it works only in some special fields.”

Whether B2B payment is one of those fields perhaps waits to be seen.

-Brian Shappell, CBA, NACM staff writer

Officials from the European Commission will be attending and exhibiting at FCIB’s Annual International Credit and Risk Management Summit at the Corinthia Hotel in Prague next month and will be hosting an information seminar on Late Payment Directive at the same venue following the conclusion of the FCIB conference on May 14 at the same venue.

The statement made by this month’s Credit Managers' Index, available now at www.nacm.org, was essentially “steady as she goes.” The CMI fell by less than a point from February, with both favorable and unfavorable factor indexes dipping by roughly equal amounts. Some sub-factors showed significant movement, but there was no clear signal from any of the factors as far as financial stress is concerned, or anything to cause much confidence either.

Among areas of concerned is a notable decline in sales levels in March, though it not far off the pace of late 2012. “The main concern is that for the last year, the sales reading has been averaging in the low 60s and now there seems to be a struggle to get there again,” said NACM Economist Chris Kuehl, PhD. On the encouraging side, the new credit applications foretell a desire for expansion on the part of businesses.

“Businesses are starting to more aggressively pursue credit,” said Kuehl. “However, serious issues remain in balancing the desire for more credit and creditworthiness.” He also added that unfavorable factor index statistics indicated there are more companies in distress than was the case a month or two earlier, and that likely reflects the consternation regarding government inactivity on key issues.

Overall, the economist noted that the March CMI is “telling roughly the same story as other economic indicators of late…Nothing is suggesting a return to recession, but neither is there a sure sign of an imminent breakout in the manufacturing or service sectors.”

-NACM staff
For complete March CMI data and analysis, visit http://web.nacm.org/cmi/cmi.asp.

As predicted in a 2011 Business Credit magazine article, the United States’ solar energy industry has taken its share of lumps over the last two years, but there are still those purporting the massive potential that solar holds. Whether true or not, there are real and continuing risks for everyone involved in the industry, and the government budget fight and “sequester” only adds a whole new dimension to potential problems, especially for survivors of the first wave of domestic solar-related bankruptcies.

U.S. product manufacturers are contending with what they see as unfair assistance to competing solar manufacturing sectors in Asia by their governments, especially that of China. The U.S. placed tariffs on Chinese imports, but the measures were seen as somewhat weak and coupled with evidence that some Chinese firms are simply off-shoring operations to areas like Singapore where such tariffs aren’t in play. In addition, the glut of U.S. producers left over from the cheap lending days of the financial boom of the late-2000s caused an industry saturation that became a real problem when demand fell during lower growth years. The two issues led to several high-profile bankruptcy filings headlined by that of Solyndra, which had ties to key Obama Administration fundraisers investigated for widespread fraud and reaping huge amounts in government grants.

Michael Joncich, manager of the business insolvency department for NACM affiliate Credit Management Association for NACM affiliate Credit Management Association, was among those who predicted the problems in 2011. He now speculates that reduced federal subsidies, grants and other assistance aren’t likely to help current matters. “Government can make or break an industry. I don’t really know if the shakeout is done yet,” he said.

Joncich noted that a colleague in the liquidation business recently learned everything he could about green businesses, thinking it was a bubble ready to pop, especially once it became apparent that the government was retracting its “generous funding” of those industries, including solar. “The observation is that they can’t seem to fund themselves,” he said. “When the government pulls back because of federal budget cutbacks, many can’t survive it,” he said.

It doesn’t mean all solar manufacturers are doomed, but there are enough red flags that virtually all creditors dealing with customers related to the solar industry should be paying close attention to them, their accounts and their terms.

- Brian Shappell, CBA, NACM staff writer
 

New learning tracks and the evolution of professional designations are part and parcel for keeping up with the varying and progressing needs of today’s business professionals, including those in credit. After a review of existing programs, and careful consideration and development, NACM announced in March the latest in a long line of world-class program designations: The Certified Credit and Risk Analyst (CCRA).

The CCRA is unlike NACM’s other longtime designation programs in that it is a standalone program. It exists outside of NACM’s “Career Roadmap” that includes the Credit Business Associate (CBA), Credit Business Fellow (CBF) and Certified Credit Executive (CCE), the latter of which is still NACM’s top-level designation for members.

The CCRA was created after Financial Statement Analysis II was removed from the CBF designation, with the new requirements effective January 1, 2013. NACM’s Education Department updated the extracted course and renamed it Financial Statement Analysis, Interpretation and Credit Risk Assessment to better reflect its emphasis. The updated version is now considered by NACM to be the cornerstone of the CCRA.

“We realized that Financial Statement Analysis II wasn’t for everyone, and that it served as a bit of a roadblock to the CBF for some members. However, we also recognized that some credit department personnel need that in-depth, advanced financial analysis background, which is why this standalone designation was created,” said NACM President Robin Schauseil, CAE.

As with other designation courses, Financial Statement Analysis, Interpretation and Credit Risk Assessment can be taken by itself as a certificate session. However, earning the CCRA requires the completion of three courses: Basic Accounting, Financial Statement Analysis I and the new Financial Statement Analysis, Interpretation and Credit Risk Assessment. The methods available to complete each course vary and can be found under “Education” at www.nacm.org. The first opportunity to take Financial Statement Analysis, Interpretation and Credit Risk Assessment is a five-segment session and exam held at Credit Congress from May 18-23.

Though separate from the “roadmap” lineup of certifications, the CCRA will serve as key program for credit professionals tied to deeper financial analysis responsibilities, and for those who will be in the future. It is also designed to build background and add key skill sets for those already pursuing a designation. “If you’ve earned your CBA and want, or need more financial analysis skills, this is for you,” Schauseil said. “It’s a great precursor to the CCE even though it’s not a part of the NACM career roadmap. It’s also a great precursor for NACM's Graduate School of Credit and Financial Management.”

To learn more about the CCRA, visit Education at www.nacm.org, or call 410-740-5560.

The Credit Managers’ Index (CMI), due for release by NACM on Thursday morning, isn’t expected to set any records, but the February statistics do appear set to track more favorably than in January.

One of the most important factors to watch, sales, is expected to show an uptick even though non-business factors seem to be playing a significant role as a drag on the category. “The strength of this indicator can’t be overlooked, as this signals substantial activity despite all the concerns registered over the ‘fiscal cliff,’ the debt ceiling and the sequester” said NACM Economist Chris Kuehl, PhD. “However, the impact has been hard to figure out. On the one hand, it is pretty obvious that the lower GDP number from the fourth quarter was directly related to fiscal cliff concerns within the business community, but the latest revisions show no dip into recession, as first thought.”

Unfavorable factor index categories are expected to show progress or at least stability. Also expected to track well are service-side indicators, in part because of what appears to be the long-awaited rebound of the housing sector. Granted, it has a long way to go. The manufacturing sector likely will be dicier in the February CMI.

Words like “caution” and “reluctance” appear to be the most bandied about in the manufacturing world, again, most likely because of ongoing problems to get things done by Washington, DC lawmakers. And, since manufacturing-based decisions must be made in advance, confidence in where things are going is crucial. That has been largely absent in advance of the February CMI.

“All of this is taking place against a backdrop of political drama that many believe will cause serious economic dislocation before all is said and done, and it seems to be the manufacturing sector that is harboring the most concern,” said Kuehl. Fortunately, with some of the most stressed sectors on the service side making what look to be a series of comebacks, it should be enough to offset the uncertainty that is dogging manufacturing at present.

-National Association of Credit Managment

The February CMI, with full statistics and analysis, are available now at www.nacm.org.

The appetite for gambling in the United States is one of those things that never seems to fall out of fashion. And, while there has been quite a boom in the Eastern U.S. for legalization of gaming operations in recent years, the surge could cause some operators to eventually go bust to the surprise of some flat-footed creditors.

Maryland is just the latest state to allow, by voter referendum in this case, expanded gaming operations at several sites throughout the state, which will include table games as well as “slot-parlor” offerings. Ohio is a recent player in the market, too, with several operations. This adds to relative newcomers in recent years like Pennsylvania (there are at least three casinos running within the borders of Philadelphia alone), West Virginia and Delaware, not to mention the many longtime operators of Atlantic City, NJ and a couple on Native America land in Connecticut.  What does that mean to suppliers of everything from gaming machines to carpeting to food services to cups for beverages that end up in these casinos? It means there is plenty of competition and real potential for market saturation, according to Patrick Spargur, ICCE, credit & collections manager with Bally Technologies Inc.

Large appetite for gaming or not, some operators likely will face the reality that there is not enough demand for everyone to thrive or even survive without solvency issues. Spargur, who will moderate the May 22 FCIB-designed educational session “Working Capital Management & Cash Forecasting” during Credit Congress in Las Vegas, told NACM some that he believes some companies will indeed face danger because of the high number of operators.

“There’s just a lot more competition in the surrounding region, and it’s major competition,” Spargur said. “Analysts I follow say, in Atlantic City alone, three to five properties need to be either shut down or converted into boutique hotels. There are too many players: Ohio is pulling [customers] from Pennsylvania; Pennsylvania is pulling from Atlantic City; West Virginia is pulling from Pennsylvania.”

In short: the spreads for various legal casino operations are going to be different from place to place and need to be monitored like a hawk by credit departments of direct suppliers to them and those upstream alike. It serves as a reminder that is critical to know an industry well, beyond overall numbers for a large region.

-Brian Shappell, CBA, NACM staff writer

Industries to Watch is a new feature of NACM’s blog (first run) and eNews. It will be a semi-regular look at areas where business credit professionals need to be focusing on for potential solvency issues because of a bevy of reasons (supply glut, government regulations or policy changes, dropping demand, etc.).

The recently named keynote speaker FCIB’s International Credit and Risk Management Summit , to be held May 12-14 in Prague, intimates in a late January interview with NACM that it is unfair and/or misleading to continue looking at member of the BRICs nations (Brazil, Russia, India, China) as a group, since the nations demonstrate more and more how little they have in common.

“You cannot talk about emerging countries, like the BRICs, as a group—It doesn’t work this way anymore,” said Ludovic Subran, chief economist at Euler Hermes. “You’d never talk about the U.S. in a regional context with Canada.”

In addition, the nations also are in a pattern where they are struggling, and failing, to maintain its white hot growth rates of the past few years. At this point, the individual nations that comprise the BRICs may have to reinvent themselves somewhat, as notable by India’ s move to diversify the economy and finish of free trade agreements to bolster opportunity.

“The BRICs are so 2005…They’ve reached their limits in growth rates,” he said of over-emphasis on BRICs members by the international business community. “Now the question is how they are each going to handle it. What’s next?”

-Brian Shappell, CBA, NACM staff writer

(Note: Look for the extended version of this story in the new edition of NACM eNews, available via email and the NACM website late Thursday afternoon. For more information on FCIB’s conference, visit http://www.fcibglobal.com/icrms-2013).

Credit professionals find “pay-if-paid” clauses within contracts, especially construction industry-based ones, to be quite the headache at times. It’s why keeping a mindful eye on them ahead of time (re: before granting credit to a would-be debtor) is so important.

Greg Powelson, director of NACM Secured Transaction Services (STS), which administers the Mechanic’s Lien and Bond Services division, has long argued that taking “I’ll pay when [or if] I get paid” as an answer to a collections attempt or something in a contract as “crazy” and unacceptable. Powelson reminded creditors of the importance of reviewing terms to find such unacceptable clause inclusions.

“It’s always scary when court decisions against 'pay-if-paid' are revisited, and it always has to be fought. They’re going to use it again [if a debtor succeeds in getting previous court decision overturned],” he said. “Regardless of enforceability, it’s important to review purchase orders and subcontracts and crossing these terms out of the contract. These kinds of things simply must be identified before extending credit.”

It speaks to the difficulty of navigating the mechanic’s lien process without the potential for a costly gap for businesses extending credit. “Because of the unique nature of mechanic’s lien statutes, all sorts of issues come up from time to time that make things more difficult than they have to be,” Powelson said. “Even if something is unenforceable in the end, credit managers could find themselves expending legal fees to support a position already well-supported by case law.”

It's worth noting the "pay-if-paid" fight is on again, right now in the 10th Appellate District Court of Appeals in Ohio (see tomorrow's eNews edition for more on this story at www.nacm.org).

-Brian Shappell, CBA, NACM staff writer
 

Though a number of favorable factors that help comprise the National Association of Credit Management’s Credit Mangers’ Index (CMI), problems with sales ultimately outweighed the positive toward the end of 2012.

The CMI, available Friday afternoon (see link at bottow of story), will show a slight decline for the month largely on disappointing sales figures. NACM economists Chris Kuehl believes this reinforces the notion that business is stalled out in anticipation of what might happen with spending and taxation next year. There was some cautious optimism just one month ago in the CMI, but that optimism has seemingly evaporated, as it seems all but certain that there will be no settlement of lasting value on the “fiscal cliff” issue paralyzing Congress and the Obama Administration.

Other favorable factors statistics were not expected to register the same level of distress, even though a few small declines were expected. Additionally, the unfavorable factor index for December will show only a slight decline. The overall sense is that this month’s decline is due to the tensions existing among (and caused by) federal lawmakers. The inability of Congress and the president to make a deal has already cost significant economic growth, and it is now anticipated that real decline in GDP growth will be the next outcome.

“The reaction captured in this month’s CMI shows a stark lack of confidence as opposed to anything substantial,” said Kuehl. “The overall news for the economy has been pretty good, and so it is with much of the CMI. The factors most connected to mood and confidence are the ones slipping. The whole business community seems to be in state of suspense.”

The complete CMI report for December 2012 contains more commentary, complete with tables and graphs. CMI archives may also be viewed on NACM’s website.

-NACM staff

As many of you know, FCIB has worked in partnership with the Department of Commerce on many initiatives designed to promote and advance international trade, including the development of the International Credit and Risk Management (ICRM) online course and the International Trade Finance Guide.

Earlier this month at the FCIB Global Conference held in Philadelphia, Carlos Montoulieu, Acting Deputy Assistant Secretary for Services Industries in the International Trade Administration of the U.S. Department of Commerce (DOC), officially released  the 3rd edition of the Trade Finance Guide and announced that FCIB will continue to promote the Guide, including producing print copies of the Guide through the Department’s partnership program.

In 2007, FCIB assisted the Commerce Department in the development of this concise guide, designed to help SMEs quickly learn how to choose the most effective and efficient credit mechanism when selling cross border. Subsequently, in recognition of its contribution to the Guide’s development and promotion, FCIB was awarded a Certificate of Appreciation from the Under Secretary for International Trade.  Since 2007, more than 300,000 copies have been distributed to small and medium size businesses, helping the Guide become a popular export assistance resource.

FCIB is proud to continue to promote this new Guide and FCIB is honored to support the U.S. Department of Commerce’s International Trade Administration.

We are confident that this initiative will generate many new business leads for FCIB and NACM, allowing both organizations to advance their missions to assist businesses strengthen their commercial credit operations.

-Robin Schauseil, CAE, NACM President
 

Several years in the making, the UCC Filing Service went fully live online this week, joining the Mechanic’s Lien and Bond Services under NACM's Secured Transaction Services umbrella.  The service provides the means to mitigate the risk of debtor nonpayment for businesses that sell or finance various types of personal property under UCC’s Article 9, as well as those that lend the labor, materials and other services under state law. The purpose, at its simplest level, is to help creditors become a secured party as an investor, thus putting them in the best possible position to get paid. Remember: secured creditors get paid out 100% (if money is available) before unsecured creditors get one cent, per bankruptcy law. This is increasingly important in areas such as construction as the domestic economic recovery, already sputtering, is threatened by ongoing and new threats, such as gridlock in the U.S. Congress.

Powelson noted that getting involved with UCC filings is not difficult when using a service providing the know-how. He recalled a colleague in Texas who, after years of “me badgering him to protect himself,” made a UCC filing about six month before a major customer filed a massive, $40 million bankruptcy. The colleague’s business was paid nearly 100% of what it was owed, unlike unsecured creditors who received pennies on the dollar.

“That filing cost him $82 and took about one hour to complete,” Powelson said. “With getting paid what he was owed, he joked that the program already paid for itself ‘for about the next 2,200 years.’ I think there are a ton of credit managers who just aren’t sure about the process and perceive it as very cumbersome. The process can be somewhat easy, actually. But sometimes you’ve got to get crushed or really kicked in the teeth and have your boss say, ‘we can’t do this anymore. What could we have done to protect ourselves?’ before you make the move.”

- Brian Shappell, CBA, NACM staff writer

FCIB's 23rd Annual Global Conference speaker John Ahearn, of Citibank, warned credit managers Tuesday that the problem with European banking debt is not just an economic issue there or even a trade headache for the United States and other exporting powerhouses; it is also a credit liquidity issue going forward on a dangerous worldwide level.

Ahearn reminded Global attendees just how much of a player European banks are in providing liquidity and capital. For example, Spanish banks are keenly important to funding a lot of businesses operating out of South America, including several emerging markets, and Germany is hooked into many parts of Central America as a credit source of massive prominence.  

Moreover, many banks involved in providing such credit may have to make tough decisions of what areas and markets they want to focus on in the coming years. What that means is the potential for less liquidity or less favorable terms. It also means that businesses of various sizes that are overly dependent on one multi-national bank could find themselves scrambling to replace them should they exit that company's market.

"Banks are going to have to start making strategic decisions: What markets do I want to be in? We believe there are going to be retractions, and this is going to be global," Ahearn said. "Banks are going to pick products they're good at and exit the rest." In essence: make sure you are using multiple banks so that if the bank you do most of your business with gets out of that business, you have other options.

-Brian Shappell, CBA, NACM staff writer