Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Archive for November, 2008

U.S. Treasury Announces Initiative to Increase Small Business and Consumer Lending

Posted by Hopeton on November 26, 2008

By Hopeton Hay

The U.S. Department of Treasury and the Federal Reserve announced a

Treasury Secretary Henry Paulson

Treasury Secretary Henry Paulson

new initiative to increase the availability of funds for small business and consumer loans, the Term Asset Securities Loan Facility (TALF). TALF will help market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration.

Under the TALF, the Federal Reserve Bank of New York will lend up to $200 billion on a nonrecourse basis to investors who purchase these asset-backed securities. The U.S. Treasury Department will provide $20 billion of credit protection to the Federal Reserve for the TALF. As a result lenders will find it easier to sell the loans they make and use the proceeds of those sales to make new loans. Recently the market for asset-backed securities had ground to a halt due to credit market stresses said U.S. Treasury Secretary Henry Paulson.

“By providing liquidity to issuers of consumer asset backed paper, the Federal Reserve facility will enable a broad range of institutions to step up their lending, enabling borrowers to have access to lower cost consumer finance and small business loans,” said Paulson.

The announcement to include small business lending in the latest initiaitive to unclog the credit markets comes on the heels of a letter sent on November 20 by U.S. Senators John Kerry, Olympia Snowe, and Charles Schumer to Paulson urging him to use a portion of the Treasury Departments rescue package to purchase SBA guaranteed loans. Sen. Kerry is Chairman of the Senate Committe on Small Business and Entrepreneurship and Sen. Snowe is a ranking member of the committee while Sen. Schumer is a senior member of the Senate Commitee on Banking.

SBA Acting Administrator Sandy Baruah applauded the new initiative as a major breakthrough in efforts breathe life into the market for small business loans.

“We expect these efforts to help free up the capital both brokers and investors need to purchase new SBA loans,” Baruah said.

Posted in Finance, Small Business Loans | Tagged: , , , , | 4 Comments »

SBA Makes Changes to Jumpstart Small Business Loans

Posted by Hopeton on November 22, 2008

By Hopeton Hay

The U.S. Small Business Administration (SBA) announced two changes to its loan guaranty program this month to stimulate small business lending.

The first change will allow banks to use an alternate base interest rate, the London Interbank Offered Rate (LIBOR), to calculate the interest rate it charges customers.  LIBOR typically is the cost of funds for banks.

SBA rules previously required banks to limit the interest rate they charged customers based on the prime interest rate. However, the decline in the historic spread between LIBOR and the prime interest rate had severely squeezed the profitability of SBA guaranteed loans.

Sandy Baruah

Sandy Baruah

“This change will help more small businesses obtain capital to grow their businesses and create new jobs,” said Sandy Baruah, Acting Adminstrator of the SBA. “By allowing both rates, SBA is making its programs more flexible, increasing opportunities to access capital and giving both lending partners and small business customers more options to meet their needs.”

The second change allows a new structure for assembling SBA loans into pools for sale in the secondary market. During normal economic times, small lenders sell their SBA loans to the secondary market freeing up capital for more loans. The financial turmoil, however, has drastically reduced the market for SBA loan pools. The SBA expects the enhanced flexibility in loan pool structures to positively affect profitability and liquidity in the secondary market for SBA guaranteed loans, especially with the current market conditions.

Eric Zarnikow

Eric Zarnikow

“The SBA moved quickly on these changes after consulting with small businesses, lending partners and other government agencies,” said Eric R. Zarnikow, SBA’s Associate Administrator for the Office of Capital Access. “We’re confident these solutions will help free up capital so lenders can continue to make SBA-backed loans.”

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Receivable and Contract Financing Focus of Nov. 24 Economic Perspectives

Posted by Hopeton on November 21, 2008

Iris Welch, a Vice President at Working Capital Solutions, will discuss receivable and contract financing on the November 24 edition of Economic Perspectives, 5:30 p.m. – 6 p.m. on KAZI 88.7FM.  Welch has over 31 years experience in the banking and finance industry.  She has held a number of key positions in the banking industry including Community Reinvestment Officer, Small Business Lender, and Branch Manager.

Iris Welch

Iris Welch

At Working Capital Solutions, a subsidiary of WebBank, Welch has developed a new financing program to help small, minority, and women-owned businesses obtain the working capital they need to handle large contracts with major corporations and government agencies, the Quick Pay Program.  The Quick Pay Program allows the payment of “approved” invoices within 24 hours.

WebBank, a Utah based financial institution, is  also an SBA preferred lender, and provides leasing, and inventory and equipment financing.

Posted in Austin, Business, Interview, Radio, Small Business Loans | Tagged: , , | Leave a Comment »

Community Investment Network Featured on November 17 Economic Perspectives

Posted by Hopeton on November 14, 2008

Hank Boerner, chief executive officer of the Governance & Accountability cinlogo_box_sqInstitute, will discuss the web portal www.communityinvestmentnetwork.org, a site providing a broad array of valuable and timely information on financial resources, tools, and trends for underserved communities and small businesses. 

The Governance & Accountability Institute (GAI) is a global research, news and trend monitoring, editorial services / publishing, analysis, and advisory services organization serving leaders and boards of organizations in the corporate, public and social/institutional sectors.

Hank Boerner

Hank Boerner

Before joining GAI, Boerner was managing director of Rowan & Blewitt, a global issue and crisis management organization.  He has also served as a board-appointed officer and senior communications manager for the New York Stock Exchange (NYSE), responsible for strategic communication with listed companies, NYSE member firms, institutional and individual investors, US and foreign media, the Congress, and the Securities and Exchange Commission.

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Business Financing During Tight Credit Times

Posted by Hopeton on November 13, 2008

By Hopeton Hay

Hopeton Hay

Hopeton Hay

The recent upheavals in the banking system of the U.S. have made it much more difficult for small businesses, especially those without pristine personal and business credit and strong financial statements to obtain loans and lines of credit. News reports indicate a number of small business owners are having their lines of credit withdrawn or bank loans called by their financial institutions. But even with all the challenges, there are still sources of capital available and strategies entrepreneurs can employ to improve access to capital.

Tight Credit Times

According to the Federal Reserve System’s national summary of the October 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices, 75 percent of respondents from domestic banks “indicated that they had tightened their lending standards on” commercial and industrial loans to small firms since July 2008. The survey also indicated that “85 percent of domestic banks reported that they had tightened their lending standards on commercial real estate loans over the past three months.”

Even the U.S. Small Business Administration (SBA), which in the past has had an increase in the number of loan guarantees approved during hard economic times according to a report by the U.S. Senate Committee on Small Business, has seen a historic decline in it guaranteed loans. The SBA’s Acting Administrator Sandy Baruah announced in October that the SBA approved 30,000 fewer government guaranteed loans through the SBA’s 7(a) program, declining from 99,604 in fiscal year 2007 to 69,434 in fiscal year 2008, the largest decline in one year in the history of the program. In response to the decline Baruah said in a press statement that “the SBA is holding meetings across the country to better understand how the agency can work with both lenders and small businesses to help them during these difficult times,”

Strategies to Improve Access to Capital

But with all the upheaval there are some things entrepreneurs can do to improve their access to capital

  1. Identify alternatives to bank financing in Austin -While the news is bad on the banking front, community development financial institutions such as AccionTexas, BiGAustin, and PeopleFund provide financing to small businesses that don’t meet traditional bank underwriting guideliness. In addition factoring companies such as Working Capital Solutions can provide accounts receivable financing. Representaives from BiGAustin, PeopleFund, and Working Capital Solutions will be making presentations on their respective capital programs at the seminar, Building Black Wealth: Surviving and Thriving During the Financial Crisison Saturday, November 15, 10 a.m. -12:30 p.m. at BiGAustin, 1050 E. 11th, Suite 350. Email hopeton@econpers.com to make your reservation.
  2. Cut business expenses – look to see what expenses you can cut and reductions you can obtain by negotiating with current suppliers of the products or services you purchase
  3. Reduce personal debt to improve credit score- as small business owners your personal credit is your business credit, so the stronger your personal credit, the more attractive you are to lenders
  4. Reduce personal cost of living – many lenders when evaluating your ability to repay the loan look at the availability of cash flow from the business and from the household. Reduced household expenses means more cash flow available to make loan payments
  5. Improve the quality and reliability of your financial statements – Lenders need to have confidence that the business financial statements you provide them accurately reflect the condition and performance of your business and that you have a good understanding of them. It is these statements that provide the “proof” that your business has the financial structure and historical performance to meet key components of their underwriting guidelines. Knowing that the owners of the business understand the financial side of the business increases the lenders confidence in your ability to make good financial decisions. Also, having your financial statements prepared by a certified public accountant may increase the confidence the lenders have in the reliability of the financial statements.

Posted in Austin, Business, Small Business Loans | Tagged: , , , , | 1 Comment »

Nov 15 Seminar: Building Black Wealth

Posted by Hopeton on November 8, 2008

As we endure the worst financial crisis the U.S. has faced since the Great Depression, it is instructive to look at how African Americans are faring economically, and develop strategies to survive and prosper in this environment.  Entrepeneurs are wondering where to get financing, families are wondering what should they do about their investments, and many wonder how the federal bailout of financial instutitions helps them.  To address these and other issues Economic Perspectives is sponsoring the seminar Building Black Wealth: Surviving and Thriving During the Financial Crisis, on Saturday, November 15, 10 a.m. – 12:30 p.m., at BiGAustin, 1050 E. 11th, Suite 350.

This seminar will address:

  • The Economic Condition of African Americans
  • The True Meaning of the Financial Bailout
  • Business Financing During Tight Credit
  • Stocks, Bonds, and 401(ks): Protecting My Investments

The featured speakers include:

  • Nelson Linder, President, Austin NAACP
  • Roger Davis, President, National Association of Black Accountants Austin Cen-Tex Chapter
  • Dr. Dwight Steward, Econmist and Director, Employstats
  • Iris Welch, Vice President, Working Capital Solutions

For reservations email hopeton@econpers.com.

Posted in African American, Business, Radio | Tagged: , , , , , | 2 Comments »

African American Unemployment Rate Highest Since 2003

Posted by Hopeton on November 8, 2008

NOTE: For the latest post on African American unemployment click the following link:  African American Unemployment Rates in February & March Highest Since 1993, Overall Unemployment Rises to Highest Since 1983

By Hopeton Hay

An analysis of U.S. unemployment data from the U.S. Bureau of Labor & Statistics reveals that the African American unemployment rates in September of 11.4% and in October of 11.1% are the highest rates seen since 2003. In June of 2003 African American unemployment was 11.5% and was 11.1% in September 2003. The African American unemployment rate has grown 2.8 percentage points since reaching a low of 8.3% in February of this year. During the same February – October 2008 period, overall unemployment rose only 1.7 percentage points from 4.8% to 6.5%. us-monthly-unemployment-rate-chart

The U.S. Bureau of Labor & Statistics has monthly unemployment data for African Americans going back to January 1972. Historically, the African American unemployment rate has persisted at being approixmately twice as high as the overall unemployment rate. The 11.1% unemployment rate for African Americans in October is far lower than the peak of 21.2% in January 1983.

This data and more information on the Economic Condition of African Americans will be presented at the seminar Building Black Wealth: Surviving and Thriving During the Financial Crisis being held November 15, 10 a.m. – 12:30 p.m. at BiGAustin. For more information see the post: November 15 Seminar: Black Wealth.

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Education and Workforce Development Initiative Focus of Nov. 10 Economic Perspectives

Posted by Hopeton on November 7, 2008

Austin community leaders Cloteal Haynes and Steve Swanson will discuss a new initiative to increase the skilled workforce and reduce student dropouts on the November 10 edition of Economic Perspectives, 5:30 p.m. –  p.m. on KAZI 88.7FM.  The Community Leadership And Relationships Initiative For Youth (CLARIFY) will convene November 15, 9 a.m. – 3 p.m. at Eastside Memorial High School at Johnston Campus, 1012 Arthur Stiles.

Cloteal Haynes

Cloteal Haynes

According to a statement from the Texas Workforce Investment Council, to successfully compete in the global economy and ensure economic prosperity,  it is necessary to “eliminate the gaps that exist between current education and occupational skills.” 

Haynes and Swanson believe community based leadership and action is the best way to address the issue.  “The process has underscored for me, the miracle that can happen when we take the time to focus on those things which bring us together as a community rather than differences whcih continue to divide us,” said Haynes.

For more information on CLARIFY go to www.clari.org

Cloteal Haynes is managing partner of Hayes-Eaglin-Waters and chairman of the board of directors of PeopleFund.  She has has over 30 years of planning and construction experience and has a masters degree from LBJ School of Public Affairs at The University of Texas at Austin.  She is a graduate of Leadership Austin and a board member of the Austin Black Contractors Association.

Steve Swanson

Steve Swanson

Steve Swanson has 30 years experience in the design and construction industry as a university instructor, structural engineer, prinicpal in a construction management firm, and as an owner’s representative.  He has been actively involved for 15 years with a number of non-profits and community intiatives addressing education, healthcare, economic development, and social services.

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