Top 25 World Banks

In most recent times these folks have lost nearly $100 billion - do you think they are actively seeking new loans right now? Probably not - if you are a customer tread lightly and bring a solid bit of collateral (not mortgages, sorry) to the table.

It's a goofy lending world out there, but for the folks under $21MM in Revenue at least you have the SBA to consider.

More Detail on the SBA revamp

Though it doesn't affect demand for borrowers products, the new SBA flexibility can help a small business survive these challenging times. More news on the program and it's effects today from the Chicago Tribune.

The SBA and How This Administration Does Business

I cannot tell you how peeved I am at the SBA. Big supporter up to now as a solid option for small businesses who need capital. Still a supporter, but as a tax payer very mad. This excellent expose by Gretchen Morgenson looks at the recent fraud involved with a big operation active in Michigan which leaves the tax payers with a huge, albeit local, possible loss, reminds me of the days of the Savings and Loan bailout. She describes the nut:

"The S.B.A.’s own Office of Inspector General examined the agency’s oversight of BLX (recently the 2nd largest SBA lender in the country!!). That inquiry preceded the federal investigation of the company in Michigan, which found that BLX’s operation in that state had made $76 million in fraudulent loans. Last year, Patrick Harrington, a former BLX executive, pleaded guilty to fraud. Since then, 35 people not employed by BLX have been indicted and charged with being co-conspirators, Michigan prosecutors said."

Unbelievable, and she makes a case for very lax oversight. And to think I thought the SBA was underfunded - now we see some very badly mismanaged situations. To allow this much fraud to go on, and to not immediately fix it, is outrageous. Fat chance Congress will be impressed with the recent for increased funding.

Is Your Bank in Trouble? - Then So Are You

Your community lender avoided the home mortgage problems of the big guys. They crow about it. But the alternative may be just as bad. If they get into financial distress on other assets they do have, your loan and livelihood is at risk. Does your CFO or accountant have a solid take on your lender? Are you prepared to consider a new relationship on your terms?

Small and mid-sized banks, those with assets less then $25 billion, have to a great extent been crowded out of the home mortgage meltdown. But not for trying. These banks were the natural home mortgage provider (taking over after the S&L meltdown of the 80's); they sat in their market, knowing the good neighborhoods and bad. The business became a big game however, where originators, many non-bankers, took over the lending portion, loosened credit standards resulting in a greatly expanded subprime home loan market. These mortgages were then sold to large administrators who managed and serviced the loans, but then packaged the assets to sell into mortgage linked investments. This new system drove out the smaller banks and forced them to seek other profitable assets.

For many banks this took the form of commercial construction and mortgage lending, as well as lending directly to home builders. These real estate assets are once removed from the direct mortgage problem the big guys have, but are now coming to roost. Signs are ominous according to the Comptroller of the Currency.

There are no hard and fast rules, but it is certainly time to examine your lender, and decide if their problems could cause them to pull the plug on your loan. Open up the dialog with those other lenders that knock on your door. Have your financial expert take a look before it's too late.

Lending Money to Employees -- a Good Thing?

The Inc.com blog Boss School throws out an interesting thought on lending your employees money. In the December 18, 2007 post entitled "This Company is not a Bank -- Or Is It?" the author suggests that it is good employee relations for the boss to lend valued employees emergency money. His example is one of an hourly employee driver who gets in trouble with the DMV. He lends the driver $5,200 to pay off the fines.

Where would this behavior fall under the concept of best-practices HR? Further, if this is a good practice, how does it fit (where, for who, in what situation, etc.)?

Under the broadest definition of employee rewards for continuing performance, we find:
-- monetary compensation, or wages and bonuses (current or near current)
-- risk based compensation, or options, phantom stock (equity or near equity schemes)
-- retirement benefit plans, like 401Ks, defined benefit plans
-- health plans, including doctor, hospital, and dental coverage
-- other benefits (vacation, group life and disability insurance, education assistance, etc.)
source: The Employee Benefit Research Institute.

I'm going to say that since the lending CEO or CFO makes an employee loan with the full intention to get back the money, and get it back promptly at that, then this is an "other benefit", akin to subsidizing a mortgage or MBA. As such it's a fourth or fifth level offering, crucial to certain employees, meaningless to others. The likeliest users would be hourly employees, and younger ones who have fewer resources amassed.

Would lending your employees money fall under a must-have offering? Certainly, especially in a small business where you have an employee base with above characteristics. I wouldn't consider it a higher target than offering group health care or some variation thereof, but many workers might value this benefit more than a 401K - where the dollars seem way far off. Afterall, you value, know, and trust these folks, why not help in a pinch?

Good reason to hold a wad of hundys in the back pocket or secret drawer, yes indeed.