Wednesday, February 20, 2013 by
Despite hope of clarity-based improvement after the election and avoidance of the fiscal cliff (albeit temporarily), the credit quality of U.S. small businesses decreased in a troubling, considerable fashion in 2012’s final quarter. Analysts in a new study report that the bad news can’t be hung on the easy scapegoat, Hurricane Sandy.
The Experian/Moody’s Analytics Small Business Credit Index noted that improvement in small business’ aggregate credit quality is expected to rise by late this year or early 2014. However, that is a part of the scant good news in the index, which declined 6.8 points to land at a historically low level of 97.3. The authors noted that reduced personal income growth drove a domino effect of lower retail sales, more cautious interest in investment on the part of the businesses and, in an increasing number of cases, borrowing to cover payroll expenses. It all adds up to smaller outfits having problems paying down credit obligations. The study noted:
“Balances less than 60 days overdue rose nearly 20% on the quarter…this was enough to push the share of delinquent dollars higher, to 9.7% from 9.4% in the third quarter...Nearly all of the climb is the result of firms that previously had been current on their payments falling behind.”
The study also dispelled the notion that a driver of the poor results could be tied to the recent storm, noting Sandy had very little real impact on statistics for the quarter.
- Brian Shappell, CBA, NACM staff writer
For more on this study, view this week's edition of NACM's eNews, available Thursday afternoon. Watch your inbox for the email link, or go directly to the eNews page at www.nacm.org.
Thursday, February 14, 2013 by
Credit conditions remained unchanged in the latest National Federation of Independent Business (NFIB) index of small business optimism, which increased 0.9 points to 88.9 in January. Despite the increase, 88.9 remains one of the lowest readings in the survey's 40-year history, indicating that small businesses are keeping their heads above water by reverting to "maintenance mode" in terms of spending and borrowing.
Only 6% of survey respondents said that all their credit needs were not met, the same reading as December's. Thirty-one percent of respondents reported that all their credit needs were met and only 3% considered a lack of financing to be their business' top problem. Another 31% of all owners reported borrowing on a regular basis, which was up two points from December's readings, but still a historically low figure.
News on planned capital outlays by small businesses was even worse, with the net percent of owners expecting better business conditions in six months stuck in a net negative 30%, a five point improvement from December but still the fourth lowest reading in nearly 40 years. Surveyed businesses seem content to maintain their current situations, focusing less on investment and growth and more on reducing inventory.
Economic uncertainty from Capitol Hill continues to be the dominant narrative driving respondents' pessimism. "Bad news continued to dominate the information flow to business owners. Gross Domestic Product (GDP) actually fell in the fourth quarter, and grew less than 2% for all of 2012. A sharp decline in defense spending subtracted about 1.3 percentage points from the growth rate, a warning as to what might happen if sequestration actually occurs with no deal to change its magnitude and timing," said NFIB Chief Economist Bill Dunkelberg. "A sharp decline in inventory building also knocked a point or more off the GDP growth rate. But even if those events had not occurred, overall growth would have still been around 2%."
- Jacob Barron, CICP, NACM staff writer
Wednesday, January 2, 2013 by
The U.S. Senate and House finally voted in favor of provisions to avert the long-discussed fiscal cliff that pitted Democrats/the Obama Administration and Republicans against each other on issues including taxes, budget spending and debt.
The last Credit Mangers’ Index (CMI) of 2012 showed a small decline on a drop-off of sales levels. Fiscal cliff uncertainty throughout last month of the year was seen as a significant driver of problems.
Proponents of Chapter 9 (municipal bankruptcy) got a boost in the form of a court decision against a pension group in California and a new law in Michigan easing filing requirementes somewhat.
A deal was struck to push back contract talks for 30 days to avert a late-December port strike that would have affected more than a dozen of the largest East Coast ports at a time when retail could ill afford delays.
India inked a Free Trade Agreement with its fourth largest trading partner, ASEAN (a block of Southeast Asian nations) and remains at work on several bilateral deals.
Exporting levels in Asia improved slightly though the steep decline in the European Union amid the debt crisis looms as a massive concern for exporting nations and businesses there and virtually worldwide.
Tribune Company finally exited bankruptcy.
European Union manufacturing levels declined by levels greater than expected.
Retail bankruptcies among British companies continued to rise for the calendar year 2012.
Russia launched a registry of companies that declare bankruptcy.
U.S. consumer and business confidence continued to slump at year's end.
(Note: For more on several of these stories, check out Thursday’s edition of NACM eNews, available late Thursday afternoon).
-Brian Shappell, CBA, NACM staff writer
Friday, December 28, 2012 by
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.
Tuesday, December 11, 2012 by
There’s no way to dress it up nicely: a near $7 billion drop in exports between September and October and a trade deficit significantly exceeding $40 billion is abysmal news for the U.S. economy and its small- and medium-sized businesses. It’s yet one more blow to confidence that new numbers show was already faltering thanks largely to partisan gridlock among federal lawmakers.
The U.S. Census Bureau and Bureau of Economic Analysis unveiled unsettling trade statistics this week showing total October exports of $180.5 billion and imports of $222.8 billion, a goods and services deficit of $42.2 billion. The revised deficit figure was $40.3 billion in September. The $6.5 billion drop in goods and additional $300 million decreases in services exported for October represents the largest month-to-month total exporting slide since January 2009.
The news should do little for business confidence, which statistics unveiled by the National Federation of Independent Businesses this week before the new trade numbers could even be factored in illustrate is not far from the historically poorest levels. The NFIB Small Business Optimism Index dropped 5.6 points in November to a level of 87.5. The monthly index has been lower only seven times since its inception in 1986. And this can’t even be blamed on “Super Storm” Sandy – the East Coast states affected worst by the storm and its aftermath were excluded from this month’s numbers to avoid event-based distortions.
NFIB Chief Economist Bill Dunkelberg argued: "Washington does not have the needs of small business in mind; between the looming ‘fiscal cliff,’ the promise of higher healthcare costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism.”
Key categories “Expect Economy to Improve” and one measuring potential for positive “Earning Trends” each declined in excess of 30% in the latest data.
-Brian Shappell, CBA, NACM staff writer
Wednesday, October 3, 2012 by
Fraud attempts at the expense of trade creditors are nothing new, and they certainly don't appear to be going away based on widespread anecdotal evidence. A case in point has been in play this year in California and underscores the importance of relying on protection tools such as NACM’s National Trade Credit Report.
We recently caught wind of an alleged California-based fraudster hitting up small- and medium-sized businesses for larger-than-usual lines of credit. The company in question, a computer/electronics wholesaler based in Montebello, went so far as to take out an active domestic corporate charter with the California Secretary of State and the valid tax permit through the California Board of Equalization. The company’s “proprietors” even took up residence in a high-end office building for several months, meeting in person with vendors’ sales and credit staffs on multiple occasions. Then, as invoices started going well past due, phones and emails started getting ignored and they vanished. The alleged scheme even caught the company of NACM member Donald Smith, director of customer accounts with Texas-based Mouser Electronics Inc.
“We wrote off $50,000, which stings a bit bigger than a bumble bee sting,” Smith said. “We would have easily lost another $50,000 or more had we not run an NACM National Trade Credit Report (NTCR) through our local NACM-Southwest affiliate and identified that this was a fraudulent scheme." Smith noted that the NTCR and the various red flags it turned up was critical in helping "stop the bleeding."
- Brian Shappell, CBA, NACM staff writer
(Note: For more on this topic, check out the extended version of this article in this week's edition of eNews, available late Thursday afternoon).
Thursday, September 20, 2012 by
Despite negative job reports, the National Federation of Independent Business' (NFIB's) Small Business Optimism Index gained 1.7 points in August, topping out at 92.9.
Positive expectations included improvements in employment indicators and overall business conditions in the fourth quarter, as well as an increase in companies making plans for capital outlays. However, responses still indicated that few employers consider this to be a good time to expand, and political uncertainty reached a new high as small employers continue to act cautiously when it comes to growing their companies.
Weak sales were also a concern in August, as trends confirmed that consumer spending remains depressed and slowed noticeably in the middle of the year. The net percent of all owners, seasonally adjusted, reporting higher nominal sales over the past three months lost four points, falling to negative 13% after a seven point decline in June. Twenty percent of all respondents still cited weak sales as their top business problem. Historically, this is a high figure, but still pales in comparison to the record of 33% set in December 2010.
Expectations in credit availability were largely unchanged, as 7% of business owners reported that all their credit needs were not met, which is the same as it was in July. An additional 31% reported all credit needs met, and 53% noted explicitly that they didn't want a loan. Financing was the top business problem for only 3% of those surveyed, compared to 23% who cited taxes and 21% who cited unreasonable regulations and red tape.
- Jacob Barron, CICP, NACM staff writer
For more information on the NFIB's latest optimism report, check out this story in this week's eNews.
Wednesday, May 30, 2012 by
The Senate Judiciary Committee approved a bill last week that would aim to make it easier for small businesses to properly reorganize.
S. 2370, the Small Business Reorganization Efficiency and Clarity Act, was reported without amendment on a unanimous voice vote during an executive business meeting. As reported in last week's edition of NACM's eNews, in addition to imposing a number of interesting research requirements on various government agencies, the bill would also double the time by which a court must confirm a small business reorganization plan, from 45 to 90 days, and give courts the authority to compel a debtor to self-identify as a small business.
A reorganization process specifically designed for small businesses already exists within the Bankruptcy Code, but debtors can choose whether or not to use it, regardless of how small they are. S. 2370 gives courts the authority to dismiss a debtor's case for failing to identify itself as a small business debtor. NACM suggested such a change in its previous work with S. 2370 sponsor Senator Sheldon Whitehouse (D-RI).
In remarks made during the bill's markup, Whitehouse described S. 2370 as a modest group of agreed-upon amendments that gives courts and debtors more time to confirm a plan, while also eliminating "catch-all" reporting requirements that served no useful purposes. Cosponsor Senator Chuck Grassley (R-IA) and Senator Tom Coburn (R-OK) agreed with Whitehouse's characterization of the bill, with Coburn describing it as a good, common sense compromise.
The Senate is in recess until next week. It remains unclear when the full chamber might take up S. 2370, or if the House Judiciary Committee has any plans to take up a similar bill, or use the legislation as a vehicle for other related purposes.
Stay tuned to NACM's eNews for ongoing updates on this bill and NACM's other legislative priorities. If you have any questions or comments about NACM's Advocacy program, email Jacob Barron, CICP at email@example.com.
- Jacob Barron, CICP, NACM staff writer
Wednesday, May 16, 2012 by
Though outsourcing has its detractors in the United States and pro-labor countries because of protectionism and/or grim economic prospects, many international credit professionals at FCIB's Annual International Credit & Risk Management Summit in Hamburg still rely on a shared services center or have more regularly come to establish their own new roots working in one.
FCIB Board Member Martine Zimmermann, credit manager at F. Hoffman-La Roche in Switzerland, noted many in her industry have centers in places like India and some Eastern bloc countries. However, having faced uncertainties, with the most notable ones being salary increases and frequently changing staff, she admits some colleagues are not quite as sold on it.
"This is especially an issue in India, where its known escalation as a key emerging economy is forcing a change in demographics, or at least demand from those who want to move up a rung amid newfound wealth, or for some, a livable wage," one credit executive at the conference noted during a question-and-answer session that intimated it might not be the right time to outsource anything more to India. "But there are still plenty of Asian and Middle Eastern areas drawing attention for the same reasons India did a few years ago: significant cost reduction."
Meanwhile, FCIB Board Member Henk Swinnen, of Netherlands-based DSM Shared Financial Service Center, defended the use of shared services centers. He noted," let's say the average rate is 7000 euros—if you increase it 10% per year, it's still much cheaper than Holland, and northern Europe." He added that his company was not outsourcing, "we're offshoring," and noted that after 10 years of use, a shared service center has been very positive.
Katarzyna Wawro of Hitachi Data Systems noted that she has been working in a shared service center, adding that, like many others, that satellite office of a foreign corporation started small and expanded after finding success. "Initially, we only did simple processes. Now everything for managing credit is there and we are doing all collection for Europe, Canada and the U.S.," Wawro said.
Not every delegate at the summit was without serious concerns, however. For example, panelist Raul Davila of New York-based Bamberger Polymers was among those who said complications with moving functions of the business farther and farther away from the main credit department hub can easily arise and oftentimes be harder to fix when thousands of miles away, or when they're operating on significant time differences, or in a vastly different cultural landscape.
- Brian Shappell, CBA, NACM staff writer
Look for more coverage on FCIB's recently-concluded International Credit and Risk Management Summit in NACM's eNews, on NACM's blog, and in Business Credit magazine!
Friday, March 30, 2012 by
If there was any federal agency that lawmakers were tripping over themselves to help, it’d be the Small Business Administration (SBA). Its close connection to the nation’s job creators is an easy source of political points for any interested legislator.
Yet, the SBA’s budget for Fiscal Year 2013 has recently received scrutiny for the agency’s skyrocketing cost of loan subsidies. At a hearing in the Senate Committee on Small Business and Entrepreneurship, Ranking Member Olympia Snowe (R-ME) grilled SBA Administrator Karen Mills on her agency’s ability to handle these increases.
“With our country’s economic recovery from the recent recession still lackluster at best, we must ensure that the SBA can be the catalyst small businesses require to get Americans back to work,” said Snowe. “That’s why it is critical the SBA establish a clear plan to reduce the subsidy costs in future years.”
From 2005 to 2009, the SBA’s flagship 7(a) and 504 loan programs operated at zero subsidy, meaning they paid for themselves through fees without any need for taxpayer support. In each of FY 2010 and FY 2011, however, the SBA required $80 million to subsidize these programs due to increased defaults, with subsidies ballooning to $350 million this year. “Looking at historical data, subsidies compared to the overall SBA budget continue to get higher every year, accounting for 12% of the total SBA budget in FY 2011; 26% in FY 2012; finally reaching an alarming 37% in FY 2013,” Snowe added. “This is the paramount issue in the Agency’s FY 2013 budget, and I urge the SBA to take these concerns seriously.”
It wasn’t all bad news for Mills, as Snowe tempered her concerns with effusive praise for Mills’ efforts to reduce the SBA’s administrative costs. “I have said that all Federal agencies, including the Small Business Administration, must tighten their belts during this difficult economic time, and I commend Administrator Mills for her effective management in this regard,” said Snowe. “Agency-wide overhead costs are largely held steady or reduced in this year’s budget request. Karen is demonstrating that the Federal government can and must do more with less, and I appreciate her leadership.”
Jacob Barron, CICP, NACM staff writer
Wednesday, February 22, 2012 by
It’s been a long, hard-fought trip to the finish line, one wrought with political and labor interests, even though a free trade agreement FTA between the United States and South Korea was forged some five-years ago. But now, barring a threatened yet unlikely veto by South Korea opposition lawmakers, the FTA is set to go into effect in a few weeks.
U.S. Trade Representative Ron Kirk and South Korean Minister for Trade Park Tae confirmed that the US-South Korea FTA will be fully in play on March 15. The deal's value is estimated at nearly $90 billion. Domestic manufacturers, especially in the automotive and agricultural products industries, stand to gain levels of market access with the Asian trade partner never realized before within said industries. Approval of the FTA with South Korea as well as Panama and Colombia had long been seen as important to boost business for U.S.-based companies feeling the pinch of lower domestic demand. The FTAs, in theory, will significantly expand U.S. exports in those markets, help small businesses and lower tariffs on American goods. The Korean FTA was widely regarded as the most significant of the three new U.S. pacts and will be the first to go into effect.
(Note: More extensive background on the fight to establish the U.S.-South Korean FTA will be featured in this week's NACM eNews, available Thursday afternoon at www.nacm.org).
Brian Shappell, NACM staff writer
Thursday, January 19, 2012 by
U.S. production should continue to move forward with solid growth through much of 2012, largely on the strength of the automotive and aerospace industries, says a manufacturing trade association economist and recent study.
Dan Meckstroth, chief economist and director of research for the Manufacturers Alliance for Productivity and Innovation (MAPI) said the organizations latest measurement of the overall business outlook was essentially unchanged between November and December. Meckstroth characterizes this as an “extremely optimistic” view for continued expansion over the next three-to-six months. Granted, small businesses are somewhat less so because of its dependence of real estate values as a primary asset in most cases.
Meckstroth noted a “major driver” for U.S. manufacturing will be necessary capital spending on the part of most U.S. businesses because so much capacity shed during the downturn needs to be replaced. Other significant drivers for manufacturing, according the recently unveiled forecast, are tied to aerospace and motor vehicle/parts production, said Meckstroth, who recently appeared at a National Economists Club event.
(Note: For extended coverage of this topic, check this week's eNews compilation available late Thursday afternoon at www.nacm.org).
Brian Shappell, NACM staff writer
Wednesday, October 19, 2011 by
The Federal Reserve’s periodical roundup of economic conditions in each of its 12 districts throughout the nation finds that, in most areas, growth is continuing but at a notably weaker pace than the same time last year. Additionally, the word of the day appears to be “uncertainty.”
The Fed’s Beige Book roundup finds growth best characterized as “modest or slight,” with a decidedly slower pace than in recent months or early fall 2010. Though not every industry sector or district is reporting bad news, conditions are not nearly as positive as had been expected because of long-time “expert” predictions that, by this point, the economic recovery would be in or near full-swing.
Consumer spending, overall, was up for the recent six-week period ending in early/mid-October. However, much of that was driven by auto sales and tourism increases. Businesses also increased spending in most districts, with areas of construction and mining equipment as well as auto-related products setting the pace. Yet, in a continuation of the good news-bad news theme, Fed contacts noted particular “restraint in hiring and capital spending plans:”
Manufacturing, long the proverbial bread-winner among all industries during the slow recovery period, showed improvement from the declines reported in the last two Beige Book periods. Again, the auto producers performed best.
On the credit front, a lengthy period of small improvements in credit conditions are ceding in some areas for anyone not in the very top tier of borrowing. That said, demand remains stunted anyway, especially in districts like Chicago and Kansas City. Also important to those two districts were declines in the agriculture sector. While yields have not fallen to shortage level, almost unilaterally, yields are noticeably down for this time one year ago. Part of this is fallout from unpredictable and/or uncooperative weather earlier in the year, especially in the central-south part of the country.
Real estate, unsurprisingly, was changed little as activity remains at low, weak levels.
Brian Shappell, NACM staff writer
Friday, October 14, 2011 by
The House Ways and Means Committee approved a bill yesterday, H.R. 674, that would repeal the 3% withholding tax. The legislation is expected to reach the House floor for a full vote before the end of the month.
Should the bill be signed into law, it would eliminate a provision that requires all local, state and federal entities to withhold 3% from their payments to contractors starting in 2013. H.R. 674 was approved by voice vote, a procedure typically used for measures that are non-controversial and enjoy widespread bipartisan support.
“Today we have taken an important step in doing what Americans have called upon Congress to do: work together in a bipartisan way to encourage job creation,” said Rep. Wally Herger (R-CA), the bill’s original sponsor. “The 3% withholding tax stands in the way of jobs because it threatens to constrict the cash flow of thousands of small businesses that provide goods and services to federal, state and local government agencies. Permanently repealing this tax is an important step toward giving these businesses the assurance that it’s safe to invest, grow, and hire more workers.”
“We’re looking for actions Congress can take to create jobs right now. This is a win-win. I urge all members to support this legislation,” he added.
As reported in yesterday’s edition of NACM’s eNews
, the 3% withholding tax was originally enacted as part of the Tax Increase Prevention and Reconciliation Act (TIPRA) of 2005. While its goal was to address the nation’s tax gap, representing the annual $345 billion in taxes legally owed but left uncollected, the provision would ultimately do more harm than good, wreaking havoc on the cash flow of companies that do business with government entities.
Prior to the markup, NACM sent a letter in support of H.R. 674 to Ways and Means Committee Chairman Dave Camp (R-MI) and Ranking Member Sander Levin (D-MI). NACM has opposed the 3% withholding requirements since its enactment and welcomes the repeal bill’s progress.
For more information on NACM’s fight to repeal the 3% withholding tax, click here
.Jacob Barron, CICP, NACM staff writer
Friday, September 16, 2011 by
One provision in President Barack Obama’s recently released American Jobs Act would further delay the 3% withholding tax on government contracts by another year. GOP lawmakers, and a coalition of business advocates, are pushing him to go a step further, to a full repeal.
The 3% withholding tax is currently set to go into effect on all government contracts worth more than $10,000 in 2013, after a series of delays since its enactment in 2006. A full repeal has remained elusive however, as eliminating the withholding requirement from the books would keep an estimated $11 billion from the nation’s ailing Treasury. Nonetheless, Republican officials are using the newly proposed delay to mount a new push for a full repeal.
"The President must know how damaging the 3% withholding rules are, as his Jobs Act calls for an additional year delay in its implementation. But if it is so harmful to small business—which it is—why not repeal it outright?,” asked Rep. Mick Mulvaney (R-SC), chairman of the House Small Business Committee’s Subcommittee on Contracting and Workforce. “Majority Leader Eric Cantor has signaled that the repeal of this job-crushing withholding requirement will be on the House agenda this fall. I hope that the President & Senate Majority Leader Harry Reid (D-NV) will also support this repeal.”
“The 3% withholding tax would hurt small business cash flow and job growth. Delaying its repeal only continues uncertainty for small business contractors. Permanent repeal will provide more certainty and help create jobs now,” he added.
Joining Mulvaney at a press conference this week was Rep. Wally Herger (R-CA), sponsor of H.R. 674, a bipartisan bill that would repeal the 3% withholding tax and has garnered 241 cosponsors. “The 3% withholding tax will harm small businesses as well as state and local governments. We need to get it off the books once and for all to avoid placing small businesses, jobs across America and our economic recovery efforts at greater risk,” said Herger. “I look forward to working with House Leadership to ensure that we get this bill passed to help our economy.”
NACM has supported a full repeal of the 3% withholding tax since its enactment, and is a proud member of the Government Withholding Relief Coalition (GWRC)
, which continues to lobby for relief from this burdensome tax. Stay tuned to NACM’s blog
and NACM’s eNews
for further updates on the repeal effort.Jacob Barron, CICP, NACM staff writer
Thursday, September 1, 2011 by
The Credit Managers’ Index (CMI) for August hasn’t been this low in more than a year—falling from July’s 53.9 to 52.7—and is now tracking at levels last seen in 2008–2009. “The news this month is not good and comes as no shock to anyone who has been tracking the data coming from all directions,” said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM). If there is any good news, it is that the combined number has not yet fallen below 50, the threshold separating contraction from expansion. But the index of unfavorable factors fell to contractionary levels. The last time the unfavorable index was this low was in the 2009 period when the recession had just started to show signs of easing. The fact that the data was not worse this month than it was is probably worth noting as most of the other indices released in the last few weeks suggested there might have been an even steeper decline.
Kuehl said the best news in this month’s data is found in the favorable index. Here the data barely changed, going from 58.9 to 58.1. This is still much lower than most of the last year, but the precipitous collapse that took place in the companion part of the overall index did not take place here. There was even some improvement in the amount of dollar collections, while declines in the sales category were slight, from 60 to 59.2. “The most interesting aspect of the data is that extension of credit actually improved in the middle of all this gloom and doom. The fact that favorable factors have improved slightly or remained stable provides some hope that conditions will improve in the coming months,” said Kuehl. “There is still demand and business progress, but the crisis in the overall economy has been putting pressure on the finances of many companies.”
Upon examining the unfavorable factors, it is striking that the problem is primarily one of sudden business stress and failure. The biggest declines were in accounts placed for collection and dollar amounts beyond terms. These are signs of real distress among customers, but it is equally significant that filings for bankruptcies did not increase dramatically and there was not an acceleration in the rejection of credit applications. The divergence in these factors is particularly interesting and informative. While speculative, one could look at this data and conclude that companies got in trouble in the last month or so because of a sudden drop in business after anticipating better times. Evidence from earlier in the year showed that companies across the board were anticipating better days in the second half of the year and many were trying to prepare for this with expansion plans. This anticipated economic growth did not come to pass and these companies swiftly got into trouble.
If there is a small silver lining to all this, it is that the level of bankruptcies has not risen at the same pace. That means one of two things. If the economy gets back in gear in the next couple of months, companies struggling now will have some time to gain control of their budgets and be able to avoid sliding further toward collapse and ultimately bankruptcy. If the economy doesn’t catch fire to some extent in the near future, the bankruptcy rate will start to climb and the index will reflect it. The other mildly encouraging piece is that the rate of rejection for credit applications was not markedly different from last month. There is still credit available to customers that are bucking the trend. This is not like the situation at the end of 2008 when the entire credit system came screeching to a halt and even the best of companies were denied access.
The data this month is mixed but with a decidedly downward slope. The CMI remains in expansion territory, but is holding on to that status by a thread. There may be another month of essentially flat growth in store, but after that the economy will begin to tilt in one direction or another. If there is no real improvement in some of the fundamentals, the index will reflect continued deterioration. There is some resilience evident in the index numbers as the favorable categories are holding their own. The sectors that will drag the whole index further under include those that are most dependent on the decisions that companies made when they were expecting some solid economic growth by now. The credit requested made sense at the time, but now there is some serious concern as far as what happens next if the growth rate remains mired in the predicted 1% to 1.5% region.
The online CMI report for August 2011 contains the full commentary, complete with tables and graphs. CMI archives may also be viewed online.
Friday, July 1, 2011 by
As noted an eNews story last week (link at bottom of story), a small business trade association took issue with the U.S. Small Business Administration’s declaration that nearly 23% of government contracting dollars went to small businesses, calling the statistics “misleading.” In a subsequent interview with National Association of Credit Management, which occurred after this week’s eNews deadline, the SBA is firing back saying its statistics are legit.
The new federal “Scorecard” on small business contracts for FY2010 included statistical findings that nearly $100 billion, 22.7% of all federal contracting dollars, went to small businesses. However, the American Small Business League (ASBL) alleged that 61 of the top 100 recipients of the so-called small business federal contracts in 2010 were, in reality, large firms. The association calls the Obama Administration’s assertions “dramatically inflated” and alleges some of the “small business” recipients in FY2010 included Lockheed Martin, AT&T and Hewlett-Packard.
Michele Chang, SBA’s senior advisor for government contracting and business development, told NACM that agencies have gone through painstaking processes to ensure the data is “clean” and free of data anomalies such as “miscoding.” She said SBA stands by the 22.7% number originally released and said an allegation from ASBL that only 5% of those receiving federal contracts were, in reality, small businesses simply was “not true.”
“We have a comprehensive data-quality process that ensures accuracy,” said Change. “We’re confident this is the cleanest data we’ve had and the cleanest it can be.”
However, when asked if Lockheed Martin, AT&T and Hewlett-Packard received money classified under small business allotments, Chang said she “can’t comment on them specifically.” Change noted that, sometimes, a smaller firm awarded an ongoing contract sometimes expands and becomes a mid-sized or large business or gets bought out/taken over by a larger firm; but she placed the onus on the businesses to report the happenings to SBA within 30 days for classification. When pushed, Chang admitted none of the aforementioned businesses would have been considered small business for a number of years and again declined to comment on whether any were classified among small businesses for the purpose of this year’s scorecard.
The original eNews story posted Thursday is available here.
Brian Shappell, NACM staff writer
Wednesday, June 15, 2011 by
Though overall business optimism has appeared to remain on a small upswing or at least level, that of small businesses continues to wane as the slow economic recovery has repeatedly failed to demonstrate signs of a quick acceleration. Meanwhile, some of those same small business owners take issue with more recent mainstream media and analysts’ suggestions that credit has been easier to come by for companies.
This week, the National Federation of Independent Business’ (NFIB) Small Business Optimism Index slipped for the third straight month in May by a slight 0.3 points. NFIB characterized the present index reading (90.9) as that of a ‘recessional-level reading.”
The results corresponded with the decline found in the Wells Fargo/Gallup Small Business Index for the first-quarter, released earlier this spring, which found small business owners positions shifting from slightly-to-moderately positive to neutral.
Wells Fargo followed that up this week with a report that small businesses still are finding it exceedingly difficult to access credit with any kind of favorable, or even perceivably fair, terms. The firm’s study found that at least 30% of responding company representatives found credit hard to come by during the last year, and 36% believe it will be increasingly difficult to do so. Despite economic growth, albeit tepid, conditions changed little in the Wells Fargo study from the first-quarter to the second-quarter. The peak in actual difficulty was slightly more than 35%, reported in Q1 2010, according to Wells Fargo statistics.
Businesses did, however, get at least one piece of somewhat good news this week…sort of. The Producer Price Index (PPI) statistics for May showed a 0.9% increase, mostly tied to increases in food and energy costs. The good news was that experts had expected the PPI to increase at a much higher rate.
Brian Shappell, NACM staff writer
Wednesday, May 25, 2011 by
With small business exporting becoming an increasing important element of the majority of U.S. commerce, attendees at NACM’s 2011 Credit Congress in Nashville flocked by the dozens to the first sessions in a series of five on “Doing Business in ___” series hosted by FCIB.
The first of which, “Doing Business in Canada” drew well in excess of 100 people and became one of the first standing room only, so to speak, sessions of Credit Congress this year. Hubert Sibre, of Davis LLP, described Canadian business terms as extremely varied depending on the province. For example, Alberta is considered very liberal from a pro-debtor standpoint, while Quebec is considered much more conservative on matters of business and credit.
Sibre suggested registering one’s business in every province is almost essential because it greatly improves their position to protect intellectual property in Canadian courts, among other things. It also helps to have a subsidiary based there because bankruptcy judgments made in the United States are unenforceable without a Canadian court officially recognizing it.
A subsequent session on South Korea was led by Kyle Choi, Esq. of Bluestone Law Ltd. Choi spoke the various aspects of why the nation’s stock is rising in the international business community, which includes a highly evolved infrastructure, a wealth of available credit information available on companies there and business-friendly law. Also helpful is its prestigious business quality rating by the World Bank and, according to Choi, that its free-trade agreements with the United States and the European Union will increase competitive fairness by reducing the gap in tariffs, estimated by some at 10%. Also, he contends it will force South Korean companies to produce better products, components and services across the board.
But there are many cultural differences and barriers that need to be taken into account, such as a desire for officials at companies to speak directly with employees on their level with your company (don't pawn her off on the secretary) and the need for formality even in e-mail correspondence.
(Note: Subsequent sessions on Doing Business in Chile, China and Brazil had not been completed at the time of this posting. More coverage is coming to NACM’s blog, eNews and the July/August edition of Business Credit Magazine in the coming days and weeks).
Brian Shappell, NACM staff writer, can be reached firstname.lastname@example.org
Wednesday, May 11, 2011 by
U.S. trade activity went through its growingly common routine of another one leap forward, one leap backward in March, the latest U.S. Department of Commerce Statistics indicate. The sum of it all remains an ever-growing trade deficit.
U.S. Commerce Secretary Gary Locke announced that U.S. exports of goods and services in March 2011 increased 4.6% between February and March to a record $172.7 billion. Both the goods side ($124.9 billion) and services ($47.7 billion) hit high-water marks historically. Among other records were the surge in the export value ($7.7 billion) as well as value of trade routed to Canada and South and Central America. The U.S. even managed to shave its Chinese trade deficit down from $18.8 billion to $18.1 billion, thanks in part to small business exporting levels. Ignoring the elephant in the room, escalating demand and prices for oil products, Locke celebrated the news in a brief statement on the Commerce website.
Far less discussed by Commerce officials was that the trade deficit increased to $48.2 billion, about a 6% increase from February to March. Oil imports spiked by 18% in March to a dollar-value-level of $39.3 billion, the highest in nearly three years.
Brian Shappell, NACM staff writer